2019 (10) TMI 643 - HC - Income Tax

Reopening of assessment u/s 147 - validity of reasons to believe - HELD THAT - Assumption of jurisdiction on the basis of the reasons given by the Assessing Officer is entirely unfounded and unjustified. The notice issued to the Petitioner on 27 January 2014 to produce documents in connection with the assessment year 2012-13 called upon the Petitioner to produce acknowledgment of return, balance sheet, profit and loss account, tax audit report etc. Petitioner was called upon to submit return of income of the Directors along with other documents such as shareholding pattern, bank account details etc. The assessment order dated 13 March 2015 pursuant to the production of profit and loss account and other documents referred to these documents. In the assessment order it is stated that the Petitioner produced all the material that was called for and the Petitioner remained present through his Chartered Accountant to submit the documents. The total income of the Petitioner was computed with reference to the profit and loss account. Therefore, the profit and loss account was called for, was submitted by the Petitioner and was scrutinized. Thus, it cannot be said that there was any failure on the part of the Petitioner to produce all the material particulars. After considering the entire material the assessment order was passed. AO is now seeking to proceed on a mere change of opinion. All these factors and the need for jurisdictional requirement were brought to the notice of the Assessing Officer by the Petitioner. Yet, the AO ignored the same and proceeded to dismiss the objections and reiterated his decision to reopen the assessment - notice and the impugned order cannot be sustained. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice and order by Income Tax Officer for reopening assessment after four years.

Analysis:
The Petitioner, a company providing marketing support services, challenged a notice and order by the Income Tax Officer seeking to reopen the assessment for the year 2012-13. The Petitioner's return was processed under section 143(2) of the Income Tax Act, and the assessment was concluded without any disallowances or additions. Subsequently, audit objections were raised regarding purchases, to which the Petitioner responded. The Income Tax Officer issued a notice under section 147 in March 2019, alleging that income had escaped assessment, and called for a return for reassessment. The Petitioner requested reasons for reopening, which were provided in May 2019, and objections were raised in June 2019, but were rejected by the Assessing Officer in the impugned order dated 12 June 2019.

The crux of the issue lies in the requirement under section 147 that if an assessment is sought to be reopened after four years, there must be a failure on the part of the assessee to fully and truly disclose material facts. The Petitioner cited various court decisions to support their case. The Assessing Officer provided reasons for reopening based on discrepancies in the Profit and Loss Account, alleging that income had escaped assessment due to the omission of certain details by the Petitioner.

The High Court found that the Assessing Officer's assumption of jurisdiction was unfounded and unjustified. The Petitioner had submitted all required documents during the initial assessment, and there was no failure to disclose material particulars. The court noted that the Assessing Officer was essentially proceeding on a mere change of opinion, disregarding the material already presented. Despite the Petitioner highlighting these factors, the Assessing Officer dismissed the objections and proceeded with the reassessment.

Consequently, the High Court quashed and set aside the impugned notice and order issued by the Assessing Officer, ruling in favor of the Petitioner. The writ petition was disposed of accordingly, in favor of the Petitioner challenging the reopening of the assessment after four years.