2014 (12) TMI 936 - HC - Income Tax

Validity of reopening of assessment u/s 147 and 148 - Failure on the part of assessee to disclose fully and truly all the material facts or not - Notice dated 29 March 2012 seeking to reopen assessment has been issued after the expiry of four years from the end of the relevant AY i.e. 1999-00 - Held that - Neither the notice dated 29 March 2006 nor the reasons supplied in support specifically state that there was any failure on the part of the assessee to disclose fully and truly all the material facts necessary for its assessment for the relevant AY as held in Hindustan Lever Ltd. vs. R. B. Wadkar, Assistant Commissioner of Income Tax & Ors. (No. 1) 2004 (2) TMI 41 - BOMBAY High Court - it is necessary whilst supplying the reasons for the issuance of notices u/s 147 and 148 of the Act to communicate as to which fact or material was not disclosed by the Assessee fully and truly, that has resulted in the income escaping assessment - apart from there being no allegation that there was any failure on the part of the petitioner to fully and truly disclose all material facts necessary for assessment, even otherwise, the reasons as recorded give no clue whatsoever as to the alleged failure on the part of the petitioner in disclosing fully and truly, the material facts necessary for its assessment - the jurisdictional parameter, for invoking the provisions of Section 147 of the Act is absent, on both the grounds mentioned in the reasons in support of the notice. Not only was there no failure to disclose fully and truly all the material facts in relation to the determination of MAT liability u/s 115JA, but further such disclosed material facts were duly considered by the AO in making the Assessment Order dated 21 March 2002 u/s 143(3) - issuance of notice and the consequent assessment order is in excess of jurisdictional restraint imposed upon the AO by the proviso to Section 147. Availability of alternative remedy Held that - The petition was lodged on or about 25 January 2007 and admitted on 26 March 2007 - at the stage when the petition was filed, the reassessment order dated 26 December 2006 had already been passed - the issues raised, do not involve any disputed questions of fact AO has not adhered to the jurisdictional restraints imposed by proviso to Section 147(1) of the Act and further there is violation of principles of natural justice - If all such circumstances are cumulatively considered, rejection of the present petition on the ground of availability of alternate remedy is not appropriate - Decided in favour of assessee.

Issues involved:

1. Assumption of jurisdiction under Sections 147 and 148 of the Income Tax Act, 1961.
2. Issuance of notice beyond the period of four years.
3. Alleged failure to disclose fully and truly all material facts.
4. Change of opinion by the Assessing Officer.
5. Violation of principles of natural justice and fair play.
6. Availability of alternative remedies.

Issue-wise detailed analysis:

1. Assumption of jurisdiction under Sections 147 and 148 of the Income Tax Act, 1961:
The petitioner challenged the assumption of jurisdiction by the Commissioner of Income Tax under Sections 147 and 148 by issuing a notice dated 29 March 2006 and the consequent reassessment order dated 26 December 2006. The court examined whether the conditions for invoking Sections 147 and 148 were met, particularly focusing on whether there was a failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment.

2. Issuance of notice beyond the period of four years:
The notice under Section 148 was issued after the expiry of four years from the end of the relevant assessment year (1999-00). According to the proviso to Section 147, no action can be taken after four years unless income chargeable to tax has escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The court found that there was neither an allegation nor circumstances indicating such a failure by the petitioner.

3. Alleged failure to disclose fully and truly all material facts:
The court noted that the reasons for reopening the assessment did not specify any failure on the part of the petitioner to disclose all material facts. The reasons provided were vague and did not indicate which particular facts or materials were not disclosed. The court emphasized that the reasons must be clear and unambiguous, and the absence of specific allegations of non-disclosure rendered the assumption of jurisdiction under Sections 147 and 148 ultra vires.

4. Change of opinion by the Assessing Officer:
The court observed that the issues raised in the reassessment notice, such as the computation of MAT liability and debiting of capital expenditure, were already considered by the Assessing Officer in the original assessment order dated 21 March 2002. The reassessment was based on a mere change of opinion, which is impermissible under the law.

5. Violation of principles of natural justice and fair play:
The reassessment order was issued in haste, immediately after the objections raised by the petitioner were disposed of. The court noted that the period between 22 December 2006 and 25 December 2006 were not working days, and the reassessment order was made on the immediate next working day, 26 December 2006. This approach was deemed to violate principles of natural justice and fair play, as the Assessing Officer did not wait for a reasonable period after disposing of the objections before proceeding with the reassessment.

6. Availability of alternative remedies:
The court addressed the objection that the petitioner should have availed of the ordinary remedies of appeal under the Act. However, given the circumstances, including the issuance of the reassessment order in violation of jurisdictional restraints and principles of natural justice, the court deemed it appropriate to exercise its extraordinary jurisdiction and not reject the petition on the ground of availability of alternative remedies.

Conclusion:
The court quashed the impugned notice dated 29 March 2006 and the reassessment order dated 26 December 2006, as the assumption of jurisdiction by the Commissioner of Income Tax was found to be ultra vires and in violation of the statutory provisions and principles of natural justice. The petition was allowed, and no order as to costs was made.

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