2014 (4) TMI 239 - HC - Income Tax

Notice for reopening of assessment u/s 147 of the Act recording of satisfaction before issuing notice u/s 148 - Held that - the conditions are sine qua non - the conditions must reflect in the notice itself - In the absence of the same, exercise of jurisdiction in issuance of the notice under aforesaid provision is patently illegal -Nothing has been disclosed or shown even in the subsequent stages thus, there is no option left, but to set aside the first notice dated March 30, 2012, and the consequential steps being order dated January 15, 2013 Decided in favour of Assessee.

Summary

Issues:
Challenge to notice under section 147 of the Income-tax Act, 1961 for reopening assessment for the assessment year 2005-06.

Analysis:
The writ petition challenged a notice issued under section 147 of the Income-tax Act, 1961 for reopening the assessment for the assessment year 2005-06. The notice was issued more than four years after the relevant assessment year, raising concerns about the legality of the delayed notice. The first proviso to section 147 of the Act specifies conditions that must be fulfilled before issuing a notice after the expiry of four years. These conditions include the satisfaction of the assessing officer that there has been an escapement of income chargeable to tax due to the assessee's failure to make a return or disclose material facts. The judgment emphasized that these conditions are essential and must be reflected in the notice itself to prevent the exercise of jurisdiction from being illegal.

The court highlighted that the legislature has granted the assessee the right that an assessment cannot be reopened after four years, except in specific situations outlined in the first proviso to section 147. Without the existence of such situations, the matter remains closed. The judgment emphasized the importance of disclosing the necessary conditions in the notice to ensure the legality of reopening assessments after the prescribed period. The court also drew analogies to illustrate the significance of disclosing essential elements in legal proceedings, such as a cause of action in a suit or a cognizable offense in a criminal complaint.

The judgment noted that despite the Revenue's submission regarding the conditions for reopening assessments, no disclosure or showing of such conditions was made even in subsequent stages. Consequently, the court set aside the initial notice dated March 30, 2012, and the consequential steps taken by respondent No. 2 in an order dated January 15, 2013. However, the judgment allowed the Revenue the opportunity to proceed in accordance with the law if there exists a strong ground for issuing a notice after impartially considering the records. The writ petition was disposed of accordingly, with pending miscellaneous applications also being resolved without costs.