2014 (9) TMI 830 - HC - Income Tax

Reopening of assessment u/s 148 Bar of limitation Held that - Assessee contended that the notice dated 23 March 2003 is beyond the period of limitation provided u/s 149 of the Act and not extended by Section 150 of the Act - this is for the reason that there is no finding given in the order of the Tribunal that deduction claimed on account of dividend is not available u/s 80M of the Act - the assessment order passed in regular assessment u/s 143(3) of the Act had allowed the claim for deduction u/s 80M of the Act thus, the present notice is mere change of opinion on the part of the AO - there is no allegation of any failure to disclose truly and fully all material facts necessary for assessment on the part of the petitioner - the Tribunal while reversing the order dated 22 August 1997 passed in block assessment and deleting the addition records that the assessee has brought evidence on record that the dividend has been distributed on 25 November 1995 i.e. before the due date 30 November 1995 - Thus, there is no finding given by the Tribunal in the order dated 25 October 2002 which could justify the issuing notice beyond the period of six years relying upon ITO vs. Murlidhar B. Deo 1964 (1) TMI 5 - SUPREME Court . The notice is not saved by Section 150 of the Act and is barred by limitation as having been issued beyond the prescribed period u/s 149 of the Act - Besides the notice having been issued almost 7 years after the end of the relevant assessment year does not indicate any failure on the part of the petitioner to disclose truly and fully all material facts necessary for assessment - the assessment order passed in the regular assessment proceedings u/s 143(3) of the Act passed on 3 March 1998 was passed by the AO subsequent to the block assessment order passed on 22 August 1997 and after considering all the facts had allowed the deduction u/s 80M of the Act - the grounds/reasons communicated to the assessee in support of the notice dated 23 March 2003 is a clear case of change of opinion and would thus be without jurisdiction Decided in favour of assessee.

Summary

Issues:
1. Validity of the notice dated 23 March 2003 issued by the Assessing Officer under Section 148 of the Income Tax Act, 1961 seeking to reopen the assessment for A.Y 1995-96.
2. Limitation period for issuing the reopening notice.
3. Allegation of failure to disclose material facts necessary for assessment.

Analysis:

Issue 1: Validity of the Notice
The petitioner challenged the notice dated 23 March 2003 seeking to reopen the assessment for A.Y 1995-96. The Assessing Officer had disallowed the deduction claim under Section 80M of the Act in the block assessment period. However, the Tribunal allowed the deduction in the regular assessment proceedings, stating that the petitioner had provided evidence of dividend payment before the due date. The impugned notice was issued beyond the prescribed period under Section 149 of the Act, almost 7 years after the relevant assessment year. The petitioner argued that the notice was a mere change of opinion by the Assessing Officer, without any failure to disclose material facts. The Court held that the notice was without jurisdiction, as it was issued beyond the limitation period and based on a change of opinion.

Issue 2: Limitation Period
The normal limitation for reopening an assessment is four years, extendable to six years if income over Rs. 1 lac has escaped assessment. The limitation can be further extended if the notice is issued based on a finding or direction of an appellate authority. In this case, the Tribunal's order did not contain any finding against the deduction claimed under Section 80M of the Act. The Tribunal's order acknowledged the deduction in the regular assessment order and found evidence of dividend distribution before the due date. Therefore, the impugned notice issued after almost 7 years was held to be beyond the prescribed period and not saved by Section 150 of the Act.

Issue 3: Allegation of Failure to Disclose Material Facts
The petitioner contended that there was no failure to disclose material facts necessary for assessment, as the regular assessment order had allowed the deduction under Section 80M of the Act after due consideration. The Court found that the impugned notice was a clear case of change of opinion by the Assessing Officer, lacking jurisdiction. The notice was quashed, and the petition was allowed.

In conclusion, the High Court held that the notice seeking to reopen the assessment for A.Y 1995-96 was invalid due to being issued beyond the limitation period and based on a change of opinion without any failure to disclose material facts. The petition was allowed, and no costs were imposed.