2019 (1) TMI 1072 - HC - Income Tax

Reopening of assessment - BAL had transferred telecom infrastructure assets to its subsidiary and the present petitioner-BIL on 31st January, 2008 for nil consideration under a Scheme of Arrangement ( SOA ) approved by the Delhi High Court - scheme of demerger conceived - validity of Reasons to believe - Held that - BIL had made full and true disclosure of material facts i.e. all primary facts which are mentioned and stated in the reasons to believe . Nothing was concealed, withheld and nothing was left to be factually discovered in the form of material mentioned in detail in accounts and other evidence, that was not disclosed/stated but could have been discovered by due diligence. In fact as noted above, reading of the reasons to believe i.e. evidence and material in form of facts and figures were duly stated and mentioned in the affidavit sworn by Mr. Raghuveer Singh Dagur on 12th February, 2010, opposing the second scheme of demerger and transfer of infrastructure assets in 12 circles by BIL to M/s Bharti Infratel Ventures Ltd. and language, facts and figures in the reasons to believe are similar, if not identical. Writ petition has to be allowed as the jurisdictional pre-conditions in the form of proviso to Section 147 is not satisfied in the facts of the present case. Explanation 1 would not apply as all primary facts were disclosed, stated and were known and in knowledge of the Assessing Officer. Further, this would be a case of change of opinion as the assessee had disclosed and had brought on record all facts relating to transfer of passive infrastructure, its book value, fair market value as was mentioned in the SOA as also that the transferred passive assets to become property of M/s. Indus Infrastructure Ltd. including the dates of transfer and the factum that one-step subsidiary Bharti Infratel Ventures Ltd. was created for the said purpose. These facts were within the knowledge of the Assessing Officer when he had passed the original assessment order for the Assessment Year 2008-09 on 20th December, 2010. Notice for reopning quashed - Decided in favour of assessee.

Issues Involved:
1. Legality and validity of the notice for re-assessment under Section 148 read with Section 147 of the Income Tax Act, 1961.
2. Rejection of objections to the reopening of the assessment.
3. Alleged failure to disclose fully and truly all material facts necessary for assessment.
4. Alleged change of opinion by the Assessing Officer.
5. Satisfaction of pre-conditions specified in the proviso read with Explanation 1 to Section 147.
6. Validity of sanction under Section 151 of the Act.

Issue-wise Detailed Analysis:

1. Legality and Validity of the Notice for Re-assessment:
The petitioner challenged the notice for re-assessment dated 31st March 2015 issued under Section 148 read with Section 147 of the Income Tax Act for the Assessment Year 2008-09. The court examined whether the Assessing Officer had "reason to believe" that income chargeable to tax had escaped assessment due to the failure of the assessee to disclose fully and truly all material facts necessary for the assessment. The court found that all primary facts were disclosed by the petitioner during the original assessment, and there was no failure to disclose material facts.

2. Rejection of Objections to the Reopening of the Assessment:
The petitioner also challenged the order dated 23rd February 2016, which rejected its objections to the reopening of the assessment. The court noted that the objections were primarily based on the grounds of absence of rational and intelligible nexus, change of opinion, and non-satisfaction of pre-conditions specified in the proviso read with Explanation 1 to Section 147. The court found merit in the petitioner's objections, particularly regarding the change of opinion and failure to satisfy pre-conditions for reopening the assessment.

3. Alleged Failure to Disclose Fully and Truly All Material Facts:
The court examined whether the petitioner had failed to disclose fully and truly all material facts necessary for the assessment. It was observed that the petitioner had made full disclosure of the Scheme of Arrangement (SOA), accounting treatment in the books, tax treatment in the return of income, and the factum of entering into a shareholder/joint venture agreement. The court found that all relevant facts were disclosed during the original assessment proceedings, and there was no failure on the part of the petitioner to disclose material facts.

4. Alleged Change of Opinion by the Assessing Officer:
The court addressed the issue of whether the reopening of the assessment was based on a change of opinion by the Assessing Officer. It was noted that the original assessment order dated 20th December 2010 was passed after considering all relevant facts and documents. The court held that the reopening of the assessment was indeed based on a change of opinion, which is not permissible under the law.

5. Satisfaction of Pre-conditions Specified in the Proviso Read with Explanation 1 to Section 147:
The court examined the satisfaction of pre-conditions specified in the proviso read with Explanation 1 to Section 147. It was observed that the proviso to Section 147 stipulates that no action shall be taken after the expiry of four years from the end of the relevant assessment year unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The court found that the petitioner had disclosed all primary facts, and there was no failure to disclose material facts. Therefore, the pre-conditions for reopening the assessment were not satisfied.

6. Validity of Sanction under Section 151 of the Act:
The court also addressed the issue of the validity of the sanction under Section 151 of the Act. It was noted that the Principal Commissioner of Income Tax had accorded satisfaction for the issue of notice under Section 148. However, since the pre-conditions for reopening the assessment were not satisfied, the sanction under Section 151 was rendered invalid.

Conclusion:
The court allowed the writ petition, quashing the notice for re-assessment dated 31st March 2015 and the order dated 23rd February 2016. It was held that the jurisdictional pre-conditions for reopening the assessment were not satisfied, and the reopening was based on a change of opinion. Consequently, the reassessment proceedings were barred by limitation and invalid under the law.

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