2023 (8) TMI 87 - HC - Income Tax

Reopening of assessment u/s 147 - Reason to believe - as argued reasons assigned by AO does not contain a whisper as regards the failure to disclose fully and truly all material facts - HELD THAT - In light of the contention made on behalf of the petitioner that the material facts towards the sub-contract charges being a part of the record, it cannot be stated that there is failure of disclosure of material facts fully and truly, such factual assertion made is not controverted to by the other side. Accordingly, on the sole ground that there is absence of finding that there is failure on the part of the assessee to disclose fully and truly all material facts, which is a jurisdictional requirement, the notice issued u/s 148 of the Act is set aside.

Summary

Issues involved: Setting aside of proceedings u/s 147 and 148 of the Income Tax Act, 1961 as being barred by limitation, opposed to law, and without jurisdiction. Challenge to the validity of the notice issued u/s 148 for the Assessment Year 2009-2010 and the communication rejecting the objections.

Summary:

Issue 1: Barred by Limitation and Jurisdiction
The petitioner sought to set aside the proceedings initiated by respondent No. 1 u/s 147 and 148 of the Income Tax Act, claiming it was barred by limitation, opposed to law, and lacked jurisdiction. The petitioner filed its return for the Assessment Year 2009-2010 on 30.09.2009 along with supporting documents. The notice under Section 148 was issued on 29.03.2016, and the petitioner requested reasons for reopening the assessment under Section 147. The respondent provided reasons for reopening the assessment in a letter dated 25.04.2016. The petitioner argued that the reasons provided did not meet the requirements under the Proviso to un-amended Section 147 of the Act, which necessitates a finding that the assessee failed to disclose all material facts necessary for assessment. The jurisdictional requirement for reopening assessment is a finding that the assessee failed to disclose all material facts necessary for assessment, as recorded in the reasons for reopening.

Issue 2: Failure to Disclose Material Facts
The petitioner contended that the material available for claim of deduction, specifically payment towards 'sub-contract charges' to M/s.Infosys China Pvt. Ltd., was part of the record and thus did not constitute a failure to disclose material facts fully and truly. The reasons provided by the Assessing Officer for reopening the assessment did not mention any failure on the part of the assessee to disclose all material facts. The absence of a finding regarding the failure to disclose material facts led to the setting aside of the notice issued under Section 148 of the Act.

Conclusion:
The Court set aside the notice issued under Section 148 of the Act due to the absence of a finding that there was a failure on the part of the assessee to disclose all material facts necessary for assessment, which is a jurisdictional requirement. The petition was disposed of based on this jurisdictional point, without delving into other contentions raised by the assessee.