2022 (12) TMI 305 - HC - Income Tax

Reopening of assessment u/s 147 - Reasons to believe - alleged failure to disclose fully and truly all material facts in so many words - accrual of income - Reopening beyond period of four years - transaction of E-auction by the Monitoring Committee, the sale of ore, and the sale of 209,961 tons of ore by the Monitoring Committee - whether the amount had indeed accrued to the Petitioner during the AY 2012-13? - HELD THAT - AO could have taken the view that even the amount of ₹64.92 crores warrants tax payment because the same was accrued to the Petitioner during the AY 2012-13. Further, perhaps the Revenue could have explored the possibility of reopening the assessment within four years from the end of the relevant AY. However, for any attempt to reopen the assessment after four years from the end of the relevant AY, the Revenue had to establish failure on the part of the Assessee to disclose fully and truly all material facts necessary for its assessment for that relevant AY. In the absence of this jurisdictional parameter, the impugned notice seeking to reopen the assessment four years after the end of the relevant AY would not sustain. The question is not whether the Petitioner was right in not offering the amount of ₹64.92 crores to tax during AY 2012-13, but the question is whether the Petitioner had disclosed, fully and truly all material facts concerning this amount of ₹64.92 crores, which, incidentally, was never received by the Petitioner during AY 2012-13. Moreover, the Petitioner disclosed this material fact and explained why this amount was not brought to tax during AY 2012-13. Apparently, this explanation found favour with the Assessing Officer; therefore, this amount was not added to the returned income for the relevant AY. As noted earlier, the record also bears out that the Petitioner duly accounted for the above amount for the following AY 2013-14, and appropriate tax was paid thereon. AO for AY 2013-2014 did not object to this amount of Rs.64.92 crores being offered to tax in AY 2013-2014 or not being offered to tax in AY 2012-2013. For all the above reasons, we are satisfied that the impugned notice exceeds the prescribed jurisdictional parameters. The impugned notice is accordingly quashed and set aside. The rule is made absolute in terms of prayer clauses (a),(b) and (c), which read as follows (a) Declare that the Impugned Notice issued under Section 148 of the Act dated 29 March 2019 (Exhibit A) and the Impugned Order on objections dated 07 December 2019 (Exhibit D) and the impugned reassessment proceedings for AY 2012-13 are wholly without jurisdiction, illegal, arbitrary and liable to be quashed. (b) Issue a Writ of Certiorari or a Writ in the nature of Certiorari or any other appropriate Writ, order or direction under Article 226 of the Constitution of India, quashing the Impugned Notice issued under Section 148 of the Act dated 29 March 2019 (Exhibit A) and the Impugned Order on objections dated 07 December 2019 (Exhibit D) and the impugned reassessment proceedings for AY 2012-13 as being wholly without jurisdiction, illegal and arbitrary.

Summary

Issues Involved:
1. Legality of reopening the assessment for AY 2012-13 after four years.
2. Alleged failure to disclose fully and truly all material facts necessary for the assessment.
3. Validity of the impugned notice under Section 148 of the Income Tax Act, 1961.
4. Compliance with jurisdictional parameters for reopening assessments.

Detailed Analysis:

1. Legality of Reopening the Assessment for AY 2012-13 After Four Years:
The Petitioner challenged the reopening of the assessment for AY 2012-13 on the grounds that there was no failure on their part to disclose fully and truly all material facts necessary for the assessment. The impugned notice dated 29.03.2019 was issued after the expiry of four years from the end of the relevant AY. The court noted that the reasons furnished for reopening did not allege any failure to disclose material facts, which is a crucial jurisdictional parameter for reopening assessments after four years.

2. Alleged Failure to Disclose Fully and Truly All Material Facts Necessary for the Assessment:
The court scrutinized the reasons provided by the Assessing Officer (AO) and found that they did not even allege a failure to disclose fully and truly all material facts necessary for the assessment. The court referred to precedents such as Hindustan Lever Ltd. v. R.B. Wadkar and Bajaj Allianz Life Insurance Company Ltd. v. Deputy Commissioner of Income Tax, which emphasized the necessity of such an allegation in the reasons for reopening. The court also noted that the Petitioner had made complete disclosures regarding the E-auction of iron ore and the receipt of sale proceeds in the subsequent year.

3. Validity of the Impugned Notice Under Section 148 of the Income Tax Act, 1961:
The court found that the impugned notice could not be sustained as it failed to meet the jurisdictional requirement of alleging a failure to disclose material facts. The court highlighted that the reasons must be clear, unambiguous, and self-explanatory, and must explicitly state the failure to disclose material facts. The court also noted that the Petitioner had fully disclosed all material facts, and the AO had the opportunity to assess these facts during the original assessment.

4. Compliance with Jurisdictional Parameters for Reopening Assessments:
The court emphasized that for reopening assessments after four years, the Revenue must establish 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 relevant facts, including the E-auction of iron ore and the receipt of sale proceeds in the subsequent year. The court also pointed out that the AO for AY 2013-14 did not object to the amount being offered to tax in that year.

Conclusion:
The court quashed and set aside the impugned notice and the reassessment proceedings for AY 2012-13, declaring them as wholly without jurisdiction, illegal, and arbitrary. The rule was made absolute in terms of the prayer clauses (a), (b), and (c) sought by the Petitioner, and there was no order for costs.