2016 (7) TMI 329 - HC - Income Tax

Reopening of assessment - proceedings initiated after the expiry of 4 years from the end of the relevant assessment year - non disclosure - reasons to believe - Held that - t during the course of the hearing, on 27th March, 2006 for Assessment Year 200203 in regular assessment proceedings, the Assessing Officer sought for certain details. In response, the Respondent-Assessee gave details as sought, pointing out that an amount of ₹ 1.16 Crores shown as bad debts in the subject Assessment Year had been received from the State Bank of India in the Financial Year 2005-06 and had offered it to tax under Section 41(1) of the Act for the Assessment Year 2006-07. Thus, we find that there has been a full and true disclosure of all material facts during the regular assessment proceedings by the Respondent-Assessee. Consequently, the condition precedent for issuing a notice beyond a period of four years from the end of the relevant Assessment Year is not satisfied. The submission made on behalf of the Revenue that as the information was given on 30th March, 2006, it would amount to nondisclosure of information, is beyond our comprehension. The requirement of law is that the Respondent-Assesse should have made true and full disclosure of all material facts necessary for Assessment. This has been certainly done. In this case, letter dated 29th March, 2006 indicates that the details filed by the Respondent-Assessee consequent to the query and directions of the Assessing Officer. This also indicates that there has been an opinion formed during the regular assessment proceedings by the Assessing Officer. Thus, the notice dated 16th March, 2009 would also be a case of change of opinion, which is not permissible. - Decided against revenue

Summary

Issues:
1. Validity of proceedings u/s. 147/148 initiated after the expiry of 4 years from the end of the relevant assessment year.

Analysis:
The judgment by the Bombay High Court pertains to an appeal challenging the order passed by the Income Tax Appellate Tribunal related to the Assessment Year 2003-04 under Section 260A of the Income Tax Act, 1961. The main issue raised by the Revenue was whether the Tribunal was justified in quashing the proceedings u/s. 147/148 as they were initiated after the expiry of 4 years from the end of the relevant assessment year. The Respondent-Assessee, a Civil Contractor, had filed the return of income for the subject Assessment Year on 15th October, 2003. During the assessment proceedings, the Respondent was asked to explain a deposit of ?32.58 lakhs, which was clarified through a detailed letter on 29th March, 2006. The assessment was completed on 31st March, 2006, under Section 143(3) of the Act.

Subsequently, a notice for reopening the assessment was issued on 16th March, 2009, based on certain discrepancies in the bad debts claimed by the assessee. The Respondent objected to the reopening, stating that the issue had been disclosed during the original assessment proceedings. However, the Assessing Officer added an amount of ?1.16 crores to the income in the reassessment order. The Respondent then appealed to the CIT(A), who dismissed the appeal. On further appeal, the Tribunal noted that the reopening notice was issued beyond the 4-year limit from the end of the relevant assessment year and that the Respondent had fully disclosed all material facts during the original assessment proceedings.

The Court observed that the Respondent had indeed disclosed all relevant details during the regular assessment proceedings, including the receipt of ?1.16 crores, which was offered for taxation in a subsequent year. The Court held that the notice for reopening was beyond the permissible period and that there was no failure on the part of the Respondent to disclose material facts. The Court further stated that the notice was a case of change of opinion, which is impermissible. Consequently, the appeal was dismissed, and no costs were awarded.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing the importance of full and true disclosure of material facts during assessment proceedings and highlighting the limitations on reopening assessments beyond the prescribed time limit.