2014 (12) TMI 1022 - HC - Income Tax

Validity of notice for reopening of assessment u/s 148 - Notices are beyond a period of four years from the end of the relevant AY Held that - In terms of Section 32 of the Act the depreciation is allowed on a block of assets and unless the same is sold it continues to be reflected in the block of assets as the items are not individualized - the AO is not required to examine the stand of the petitioners in detail - where an efficacious alternate remedy is available, we would not normally as a matter of self-restraint exercise our extra ordinary jurisdiction under Article 226 of the Constitution of India as held in Commissioner of Income Tax & others Versus Chhabil Dass Agarwal 2013 (8) TMI 458 - SUPREME COURT - where in issuing the notice the Authority has acted contrary to the statutory provision or in defiance of the judicial procedure, the Court would interdict such a proceeding notwithstanding an alternate remedy - the impugned reopening notices have been issued in breach of the first Proviso to Section 147 of the Act which inter alia provides that in the absence of a failure to make and disclose true, full and complete disclosure, the AO has no jurisdiction to issue notice for reopening after the end of four years from the end of the relevant AY - there has been no failure to disclose truly and fully all material information at the time of original assessment proceedings.

Summary

Issues:
1. Challenge to notices under Section 148 of the Income Tax Act for Assessment Years 2007-08 and 2008-09.
2. Requirement of failure to disclose all material facts necessary for assessment.
3. Identical reasons and order for both notices.
4. Discrepancy in the treatment of written-off assets in the petitioner's income.
5. Depreciation on block of assets and valuation of purchased business.
6. Assessing Officer's disposal of objections and lack of reasoning.
7. Breach of statutory provisions in issuing reopening notices.

Analysis:
1. The petitions challenged two notices issued under Section 148 of the Income Tax Act for the Assessment Years 2007-08 and 2008-09, beyond the four-year period from the end of the relevant Assessment Year. The jurisdiction to reopen assessment requires the additional condition of failure to disclose all material facts necessary for assessment.

2. The reasons for the notices were identical, and the order on objections passed by the Assessing Officer was also identical, leading to interim relief being granted on the same grounds for both notices.

3. The reasons for the notices highlighted a discrepancy in the treatment of written-off assets in the petitioner's income, raising questions about the disclosure of material facts during the original assessment proceedings.

4. The petitioner's purchase of a business included valuation of assets subject to depreciation under Section 32 of the Act. The objections raised by the petitioner regarding the disclosure of facts were not adequately addressed in the order disposing of objections by the Assessing Officer.

5. The Assessing Officer's approach to dealing with objections lacked sufficient reasoning, as highlighted by the court. The court emphasized the importance of giving reasons to address the objections raised by the Assessee before proceeding with reassessment.

6. The court found that the reopening notices were issued in breach of the statutory provision of Section 147 of the Act, which requires a failure to disclose true and complete information for the Assessing Officer to have jurisdiction to issue notices after the four-year period. The order disposing of objections did not adequately address the petitioner's primary objections, indicating a lack of compliance with statutory requirements.

7. In conclusion, the court found prima facie evidence that there was no failure to disclose all material information during the original assessment proceedings, leading to the interim relief being granted in favor of the petitioner.