2016 (9) TMI 860 - HC - Income Tax

Reopening of assessment - Held that - There is no failure on the part of the petitioner, to fully and truly disclose all material aspects, we have no hesitation to hold that the impugned action in the form of notice under section 148 and order of rejection of petition being not sustainable in the eye of law. Therefore, in view of the aforesaid set of circumstances, we are of the opinion that the said action challenged in the petition is required to be set aside. The petition is allowed to the aforesaid extent and notice under section 148 of the Act as well as order dated 01.07.2011 are quashed and set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act.
2. Reopening of assessment after four years.
3. Allegation of non-disclosure of material facts by the petitioner.
4. Impact of subsequent judicial decisions on reopening assessments.

Detailed Analysis:

1. Validity of the notice issued under Section 148 of the Income Tax Act:
The petitioner challenged the validity of the notice issued under Section 148 of the Income Tax Act dated 28.03.2011 and the subsequent order dated 01.07.2011 rejecting the petitioner's objections. The petitioner argued that the reopening of the assessment was without jurisdiction as there was no allegation of non-disclosure of material facts by the petitioner. The court noted that the reasons recorded for reopening did not contain any allegations of non-disclosure by the petitioner, and the reopening attempt was based on a later judicial decision.

2. Reopening of assessment after four years:
The court examined whether the reopening of the assessment after more than four years was permissible. It was noted that the reopening was attempted based on a later judicial decision (Ahmedabad Bench, reported in 2008 113 ITD 209) which held that the provisions of Section 80IA have to be applied for the computation of deduction under Section 80IB. The court referred to the first proviso to Section 147 of the Act, which requires that for reopening after four years, there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Since no such failure was alleged, the reopening was deemed impermissible.

3. Allegation of non-disclosure of material facts by the petitioner:
The petitioner argued that all material facts were disclosed during the original assessment proceedings, including details of the claims under Section 80IB. The court found that the petitioner had indeed disclosed all primary facts and that the reasons recorded for reopening did not allege any non-disclosure. The court emphasized that the power of reassessment cannot be used to correct mistakes or review opinions already formed, especially in the absence of any failure to disclose material facts.

4. Impact of subsequent judicial decisions on reopening assessments:
The court addressed the issue of whether a subsequent judicial decision could justify the reopening of an assessment. The court referred to several precedents, including the decision in Austin Engineering Co. Ltd. v. Joint Commissioner of Income Tax, which held that a change in the law after the assessment cannot justify reopening after four years unless the assessee failed to disclose material facts. The court concluded that the reopening based on the later decision was not permissible, as the petitioner had disclosed all relevant facts during the original assessment.

Conclusion:
The court held that the reopening of the assessment after four years was not justified, as there was no failure on the part of the petitioner to disclose material facts. The notice issued under Section 148 and the order dated 01.07.2011 were quashed and set aside, and the petition was allowed. The court emphasized that the reopening of assessments based on subsequent judicial decisions is impermissible in the absence of non-disclosure of material facts by the assessee.