2017 (12) TMI 585 - HC - Income Tax

Reopening of assessment - reason to believe - Held that - The reassessment proceedings initiated against the petitioner for the Assessment Year 2009-10 are barred on two counts i.e. for non-compliance of the first proviso of Section 147; also no tangible material exists in support of the belief recorded by the Assessing Officer that income had escaped assessment. Consequently, reason (to be formed by the assessing authority) that is a sine-qua-non as to the belief of escapement has also to be held to be lacking or non-existent as unless there exists tangible material no reason may arise at all. Therefore, the jurisdictional requirement of section 147 has not been shown to exist or established - Decided in favour of assessee.

Issues Involved:
1. Validity of reassessment proceedings initiated beyond four years from the end of the relevant assessment year.
2. Full and true disclosure of material facts by the petitioner during the original assessment proceedings.
3. Existence of tangible material to justify the reassessment.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings Initiated Beyond Four Years:

The petitioner challenged the reassessment proceedings initiated for the Assessment Year 2009-10 via a notice dated 23.03.2016, arguing it was barred under the first proviso of Section 147 of the Income Tax Act, 1961. The court noted that the reassessment notice was issued beyond four years from the end of the relevant assessment year. The court referenced the judgment in M/S Aci Oils Pvt. Ltd. Vs. Dy. CIT, which emphasized that for reopening assessments beyond 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.

2. Full and True Disclosure of Material Facts:

The petitioner argued that during the original assessment proceedings under section 143(3) for A.Y. 2009-10, all material facts were fully and truly disclosed. The court examined the nature and extent of the disclosure made by the petitioner, noting that the petitioner had provided detailed replies to the assessing officer’s queries about investments in shares and construction of a building. The petitioner had disclosed that the investments were made from its bank account with Canara Bank and that it had sufficient surplus funds to cover these investments. The court found that the primary and material facts disclosed by the petitioner were indeed full and true, and the assessing officer had applied his mind to the same during the original assessment.

3. Existence of Tangible Material to Justify Reassessment:

The court emphasized that for valid reassessment, there must be tangible material to form a reasonable belief that income had escaped assessment. The court referred to the judgment in Arun Gupta Vs. Union of India, which held that the reasons to believe must be based on some material facts. The court found that the reassessment proceedings were initiated based on the same material already examined during the original assessment. The assessing officer’s belief that income had escaped assessment was solely based on the outstanding business loan without considering the disclosed surplus funds. The court concluded that there was no new tangible material to justify the reassessment.

Conclusion:

The court held that the reassessment proceedings initiated against the petitioner were barred under the proviso to Section 147 of the Act, as the petitioner had made full and true disclosure of all material facts during the original assessment. Additionally, there was no tangible material to support the belief that income had escaped assessment. Consequently, the reassessment proceedings were quashed, and the writ petition was allowed with no order as to costs.

← Previous Next →