2015 (2) TMI 862 - HC - Income Tax

Reopening of assessment - Whether the bar of four years provided by first proviso of section 147 of the Income Tax Act can be made applicable to the facts of the present case or not? - Held that - When even as per the respondent, all the relevant facts were disclosed and produced at the time of earlier assessment pertaining to the claim of depreciation and when there is no ground for non-discloser of true and correct relevant material, bar of 4 years, as per first proviso to Section 147 of the Act, would apply and the action under Section 147 of the Act for reopening of the assessment could be said as without jurisdiction and the action cannot stand in the eye of law. As decided in the case of General Motors India (P) Ltd. (2012 (8) TMI 714 - GUJARAT HIGH COURT) if the objections are not decided to the reasons for opening of reassessment and the department has proceeded for reassessment, the assessee would be well within his right to invoke the jurisdiction of this Court under Article 226 of the Constitution. As the mandatory procedure is not followed for disposal of the objection before proceeding with reassessment, initiation of the action as well as the subsequent order for reassessment would be required to be quashed. - Reassessment quashed - Decided in favour of assessee.

Summary

Issues:
1. Reopening of assessment under Section 147 of the Income Tax Act, 1961 after the expiry of the four-year period.
2. Failure to consider objections before reassessment.
3. Admissibility of depreciation and disclosure of material facts.

Issue 1: Reopening of assessment under Section 147 after the four-year period:
The judgment discusses a case where the petitioner filed a return of income for the A.Y. of 2008-2009, and subsequently, a notice was issued under Section 147 of the Income Tax Act in 2013. The petitioner contended that the notice for reopening the assessment was barred by the first proviso to Section 147 as the four-year period had expired. The court analyzed the provision of Section 147 and emphasized that unless there was a failure to disclose fully and truly all material facts necessary for assessment, the action for reopening after the four-year period is impermissible. The court held that since all relevant facts were disclosed during the earlier assessment, the action for reopening after the expiry of four years was without jurisdiction and quashed the reassessment order.

Issue 2: Failure to consider objections before reassessment:
The judgment highlights that the objections filed by the petitioner against the reasons recorded for reassessment were not considered by the concerned officer before proceeding with the reassessment. The petitioner relied on a previous decision where it was held that if objections are not decided before reassessment, the assessee can seek relief under Article 226 of the Constitution. The court found merit in this contention and held that the failure to dispose of objections before reassessment renders the action as well as the subsequent reassessment order liable to be quashed. Consequently, the court quashed and set aside the reassessment order due to the failure to consider objections.

Issue 3: Admissibility of depreciation and disclosure of material facts:
The judgment further delves into the aspect of admissibility of depreciation claimed by the assessee and the disclosure of material facts. The petitioner contended that full and true disclosure was made regarding the depreciation claimed, and all relevant documents were produced during the earlier assessment. The court noted that the respondent did not dispute the factual aspect of true disclosure made by the assessee. Consequently, the court held that since there was no failure to disclose material facts, the action for reopening the assessment was without jurisdiction and quashed the reassessment order.

In conclusion, the High Court of Gujarat, in a detailed analysis, quashed the reassessment order due to the expiry of the four-year period, failure to consider objections before reassessment, and the absence of any failure to disclose material facts. The judgment emphasizes the importance of complying with procedural requirements and ensuring the proper consideration of objections before proceeding with reassessment under Section 147 of the Income Tax Act.