2014 (7) TMI 140 - HC - Income Tax

Reopening of assessment u/s 148 of the Act full and true disclose of all material facts Held that - The reasons as recorded, when read as a whole do not indicate even remotely any failure on the part of the assessee to disclose fully and truly any material facts necessary for assessment - The only reason recorded by the AO for re-opening is the subsequent decisions of Tribunal and Courts - There is no whisper of any facts indicating that the assessee had not having disclosed any fact which led to a reasonable belief that income chargeable to tax has escaped assessment - the reasons as recorded for issuing the notice dated 10th January 2005 do not satisfy the jurisdiction requirement in case of notice issued beyond a period of four years from the end of the relevant Assessment Year i.e. 1998-99 the notice does not satisfy the jurisdictional requirement of reasonable belief that income chargeable to tax has escaped assessment on account of the assessee failure to disclose truly and fully material facts necessary for assessment. Relying upon DIL Ltd. v/s. Assistant Commissioner of Income Tax and Others 2012 (2) TMI 85 - BOMBAY HIGH COURT - In view of the retrospective amendment of law by Parliament, the AO may have reason to believe that income has escaped assessment - But that in itself is not sufficient for reopening an assessment beyond the period of four years - Beyond the period of four years when an assessment is sought to be reopened, there must be a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment - re-opening of an assessment beyond a period of four years from the end of the Assessment Year in the absence of any failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment would not give jurisdiction to issue notice under Section 148 of the Act Decided in favour of Assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Jurisdictional requirements for reopening an assessment beyond four years.
3. Alleged failure to fully and truly disclose all material facts necessary for assessment.

Detailed Analysis:

1. Validity of the Notice Issued under Section 148 of the Income Tax Act, 1961:

The petitioner challenged the notice dated 10th January 2005 issued under Section 148 of the Income Tax Act, 1961, which sought to reopen the assessment for the Assessment Year 1998-99. The petitioner argued that the notice was issued beyond the four-year limitation period and did not indicate any failure on their part to disclose all material facts necessary for assessment. The notice was based on subsequent judicial decisions, which, according to the petitioner, do not justify reopening the assessment.

2. Jurisdictional Requirements for Reopening an Assessment Beyond Four Years:

The court emphasized that under the proviso to Section 147 of the Act, reopening an assessment beyond four years requires two cumulative conditions:
(a) There must be a reason to believe that income chargeable to tax has escaped assessment.
(b) The escapement of income should be due to the assessee's failure to fully and truly disclose all material facts necessary for assessment.

The court referred to the case of Hindustan Lever Ltd. v/s. R. B. Wadkar, which established that the reasons recorded at the time of issuing the notice must explicitly state the failure to disclose material facts. Any additions or substitutions to these reasons are not permissible.

3. Alleged Failure to Fully and Truly Disclose All Material Facts Necessary for Assessment:

The petitioner contended that the reasons for reopening did not mention any failure on their part to disclose material facts. The court found that the reasons recorded for reopening were based solely on subsequent judicial decisions and did not indicate any failure by the petitioner to disclose necessary facts. The court stated that the absence of specific words indicating failure to disclose material facts does not automatically invalidate the notice, but the reasons must imply such a failure, which was not the case here.

The court also noted that the order rejecting the petitioner's objections dated 28th February 2005, which alleged failure to disclose material facts, could not substitute the original reasons recorded for reopening. The court concluded that the reasons recorded did not satisfy the jurisdictional requirement of a reasonable belief that income had escaped assessment due to the petitioner's failure to disclose material facts.

Conclusion:

The court allowed the petition, quashing the notice dated 10th January 2005 and the subsequent order rejecting the petitioner's objections. The court held that the notice did not meet the jurisdictional requirements for reopening the assessment beyond four years, as it was based solely on subsequent judicial decisions and did not indicate any failure by the petitioner to disclose material facts necessary for assessment. The decision of the Apex Court in A.L.A. Firm v/s. Commissioner of Income Tax was deemed not applicable to the present case, as it dealt with different circumstances and a different period of limitation. No order as to costs was made.

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