2018 (1) TMI 675 - HC - Income Tax

Reopening of assessment - condition precedent necessary under Section 151(1) not complied - recording of satisfaction - issue of notice after 4 years - Held that - Since from the facts, it is evidently clear that the condition precedent necessary under Section 151(1) for issuance of a notice under Section 148 is not available or is reflected that from the proceedings, it is then that the principles laid down by the Constitutional Bench of Hon ble Supreme Court in the case of Calcutta Discount Company Ltd. vs. Income Tax Officer 1960 (11) TMI 8 - SUPREME Court other similar judgments come into play envisaging the writ Courts having the power to exercise the power of issuance of writ, prohibiting the Income Tax officer from the proceedings with reassessment when patently it appears that the proceedings are in contravention to the provisions of the Income Tax Act. Since this Court finds that issuance of notice under Section 148 at the first instance itself was without a proper sanction as is required under the proviso to Section 151(1) of the Income Tax Act. We need not go into the veracity and merits of the case any further at this stage. - Decided in favour of assessee

Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Validity of the order rejecting objections to the notice under Section 148.
3. Compliance with the limitation period prescribed under the Act.
4. Requirement of tangible material for reopening assessment.
5. Jurisdiction of the writ court to intervene in reassessment proceedings.

Issue-wise Detailed Analysis:

1. Legality of the Notice Issued under Section 148:
The petitioner challenged the notice dated 28.03.2017 issued under Section 148 of the Income Tax Act, 1961, arguing it was issued beyond the prescribed four-year limitation period. The petitioner contended that the notice lacked tangible material and was based on baseless reasons. The court examined the statutory provisions under Sections 149 and 151 of the Act, which mandate that no notice under Section 148 can be issued after four years unless the Commissioner is satisfied with the reasons recorded by the Assessing Officer. The court found that the notice did not comply with these statutory requirements, particularly the need for specific reasons for reopening the assessment beyond four years.

2. Validity of the Order Rejecting Objections:
The petitioner also contested the order dated 25.09.2017, which rejected their objections to the notice under Section 148. The court noted that the reasons provided for reopening the assessment were not substantiated with tangible material and that the objections were dismissed without proper consideration. The court emphasized that the reasons for reopening must be clear, unambiguous, and based on specific material facts, which were missing in this case.

3. Compliance with the Limitation Period:
The court highlighted the importance of adhering to the limitation period prescribed under Section 149, which restricts the issuance of notices beyond four years from the end of the relevant assessment year. The court found that the notice issued on 28.03.2017 was beyond this period, and the required sanction under Section 151(1) was not obtained in a manner that satisfied the statutory requirements. The court referred to judgments from the Bombay and Delhi High Courts, which reinforced the need for strict compliance with the limitation period and the necessity of clear reasons for reopening assessments.

4. Requirement of Tangible Material:
The petitioner argued that there was no new material to justify the reopening of the assessment. The court agreed, noting that the reasons recorded by the Assessing Officer lacked tangible material and were based on vague and unsubstantiated claims. The court reiterated that the formation of belief for reopening an assessment must be based on concrete evidence, not mere suspicion or conjecture.

5. Jurisdiction of the Writ Court:
The Income Tax Department argued that the petition was premature and that the petitioner had an alternative remedy of appeal. However, the court held that it had jurisdiction to intervene in cases where the reassessment proceedings were initiated in contravention of statutory provisions. The court cited authoritative decisions from the Supreme Court, which affirmed the writ court's power to prohibit reassessment proceedings that violate the Income Tax Act.

Conclusion:
The court concluded that the notice under Section 148 was issued without proper sanction and in violation of the statutory requirements under Section 151(1). Consequently, the notice and the reassessment proceedings were quashed. The writ petition was allowed on the ground of non-compliance with the statutory conditions precedent for issuing the notice under Section 148. The court did not delve into the merits of the case, leaving those issues open for future consideration.

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