2019 (12) TMI 39 - HC - Income Tax

Reopening of assessment u/s 148 - whether documents furnished by the Petitioner that an assessment order under Section 143(3) - HELD THAT - Case has been put up before the AO by the Petitioner squarely that the entire income earned whether on Shareholders account or Policy holders account should be recorded as income arising from life insurance business. Upon this submission of the Petitioner and the documents furnished by the Petitioner that an assessment order u/s 143(3) of the Act came to be passed. It is clear from the Reasons that there is no reference to any new tangible material, but the reference is only to the financial statement of the Petitioner itself. Therefore, there is not only no failure to disclose any material facts, there is no mention in the reasons that there has been a failure to disclose. A specific query was raised regarding the implications of Shareholders account, which dealt with by the AO in the assessment order and what is sought to be done by the AO in the impugned notice and order is a mere change of opinion, which is not permissible. These grounds, which constitute jurisdictional requirements, by series of judicial pronouncements, are held to be grounds for setting aside the initiation of reassessment proceedings. The impugned notice and impugned order passed by the AO being beyond this jurisdiction are required to be quashed and set aside.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for reopening assessment for Assessment Year 2012-13 based on failure to disclose all material facts necessary for assessment.

Analysis:
The petitioner, a life insurance company, filed its return of income for Assessment Year 2012-13 declaring total income in accordance with Section 44 of the Income Tax Act, 1961. The Assessing Officer issued notices under various sections, and an assessment order was passed in 2016. Subsequently, a notice under Section 148 was issued in 2019 seeking to reopen the assessment due to alleged under-assessment of income in the Shareholders' account. The petitioner challenged this notice, arguing that there was no failure to disclose material facts necessary for assessment, as evidenced by the detailed explanations provided during the regular assessment proceedings.

The jurisdictional requirement for reopening assessments after four years is the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The reasons supplied by the Assessing Officer highlighted discrepancies in the treatment of income between the Policyholders' and Shareholders' accounts, leading to alleged under-assessment of income and tax liability. However, the petitioner had previously explained how both accounts constitute part of the life insurance business, and this explanation formed the basis for the assessment order under Section 143(3) of the Act.

The court noted that the reasons provided for reopening the assessment did not reference any new tangible material but relied on the financial statements submitted by the petitioner. This lack of failure to disclose material facts and the absence of any mention of such failure in the reasons indicated a mere change of opinion by the Assessing Officer, which is impermissible. Jurisprudential principles dictate that such grounds are insufficient to initiate reassessment proceedings.

Consequently, the court quashed and set aside the impugned notice dated 29 March 2019 and the order passed by the Assessing Officer on 8 March 2016, as they were deemed to be beyond the Assessing Officer's jurisdiction. The judgment emphasized the importance of fulfilling jurisdictional requirements and the prohibition against reassessment based solely on a change of opinion without new material facts.