2019 (2) TMI 61 - HC - Income Tax

Reopening of assessment - notice beyond four years - interest on fixed deposit undisclosed - Held that - Undisputedly, the impugned notice dated 26.3.2018 has been issued beyond the period of four years from the end of relevant assessment year i.e 2011-12. The regular assessment was completed under Section 143(3) of the Act. Thus, in view of the clear mandate of the first proviso to Section 147 of the Act, reopening notice on the above facts can only be sustained if there has been a failure on the part of the assessee to truly and fully disclose all material facts necessary for assessment. Bare reading of the reasons in support of the impugned notice would make it evident that there has been a complete disclosure of all material facts on the part of the petitioner in the regular assessment proceedings under Section 143(3) of the Act. This is so as the basis of the notice as indicted in the reasons is information collected from the examination of the records. There is no new tangible material received by the AO that has triggered the impugned notice. Moreover, these reasons, further, record that the amounting to ₹ 1.84 crore have been credited to profit and loss account and have been offered to tax by the petitioner as part of its business income, however, the same was not accepted by the Assessing Officer on the ground that the petitioner did not carry out any business. Be that as it may, the impugned notice is clearly hit by the first proviso to Section 147 as there has been no failure on the part of the petitioner to disclose truly and fully all material facts necessary for assessment in the proceedings leading to an order under Section 143(3) of the Act. - decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for reopening assessment for the assessment year 2011-12.

Analysis:
1. Facts Leading to the Petition:
The petitioner filed a return of income for the assessment year 2011-12, declaring a loss and including income from fixed deposits as part of its business income. The Assessing Officer disallowed the business loss claim, resulting in assessing only rental income. Subsequently, a notice was issued seeking to reopen the assessment based on discrepancies in the claimed expenditure and treatment of fixed deposit interest.

2. Reasons for Reopening Assessment:
The reasons recorded by the Assessing Officer highlighted discrepancies in the treatment of rental income, fixed deposit interest, and claimed expenditures. The AO disallowed the claimed expenditures and brought forward losses, leading to under-assessment of income. The notice was issued beyond the four-year period from the relevant assessment year.

3. Legal Analysis:
The court observed that the impugned notice lacked jurisdiction as there was no failure on the petitioner's part to disclose all material facts during the original assessment under Section 143(3) of the Act. The reasons for reopening were based on information already available during the regular assessment, without any new tangible material triggering the notice. The court held that the notice did not meet the requirement of failure to disclose material facts, as the petitioner had made a full disclosure during the initial assessment.

4. Conclusion:
Based on the analysis, the court quashed and set aside the impugned notice, ruling it to be without jurisdiction. The petition challenging the notice under Section 148 for reopening the assessment for the assessment year 2011-12 was allowed in favor of the petitioner.