2021 (12) TMI 58 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - eligibility of reasons to believe - Notice after expiry of 4 years from the relevant Assessment Year - HELD THAT - There is not even a whisper that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that year. Failure to disclose would render the notice issued under Section 148 being held as without jurisdiction.

Summary

Issues:
1. Validity of notice under Section 148 of the Income Tax Act for reopening assessment for the Assessment Year 1998-1999.
2. Compliance with the provisions of Sections 147 and 148 of the Act regarding the time limit for reopening assessments.
3. Requirement of disclosure of material facts by the assessee for assessment.

Analysis:

1. The petitioner challenged the notice dated 28/3/2005 seeking to reopen the assessment for the Assessment Year 1998-1999. The petitioner contended that there was no failure on their part to disclose all material facts necessary for the assessment of that year. The Court emphasized that failure to disclose would render the notice without jurisdiction. The absence of any indication of failure to disclose fully and truly all material facts necessary for assessment would make the notice ultra vires.

2. The Court referred to a judgment in Crompton Greaves Ltd. V/s. Assistant Commissioner of Income Tax, emphasizing that the assumption of jurisdiction under Sections 147 and 148 is subject to the condition that there must be a clear indication of failure to disclose material facts in the reasons supplied for reopening. The Court highlighted that if no failure to disclose is evident from the reasons, the assumption of jurisdiction would exceed the legal constraints imposed by the Act.

3. Another judgment, Hindustan Lever Ltd. vs. R. B. Wadkar, was cited to establish the requirements under Section 147 of the Act. The Court reiterated that the Assessing Officer must have reason to believe that income has escaped assessment due to the assessee's failure to disclose material facts. The judgment emphasized that the reasons recorded by the Assessing Officer should be clear, unambiguous, and based on evidence to justify the reopening of assessments. In this case, the notice issued was beyond the prescribed period and did not comply with the requirements of the Act, leading to the quashing of the notice and consequential order.

4. Ultimately, the Court quashed the notice dated 28/3/2005 and the consequential order dated 20/2/2006. The rule was made absolute in favor of the petitioner, issuing a Writ of Certiorari to examine the legality and validity of the notice and orders, thereby setting them aside.

5. The petition was disposed of in favor of the petitioner, highlighting the importance of adherence to legal provisions and the necessity for the Assessing Officer to establish a valid reason to believe that income has escaped assessment due to the assessee's failure to disclose material facts.