2025 (3) TMI 414 - HC - Income Tax

Reopening of assessment u/s 147 - Notice issued after four years - reasons to believe - issue of guarantee fees is pending before the Tribunal - HELD THAT - As per the first proviso to Section 147 of the Act reassessment proceedings cannot be initiated unless there is a failure to disclose fully and truly all material facts necessary for the original assessment. In the instant case reasons reproduced in the draft assessment order which were the reason furnished to the petitioner at the first instance does not allege any failure on the part of the petitioner to disclose fully and truly all material facts anywhere in the assessment. There is no an allegation that any income has escaped assessment. Therefore on this ground itself the proceedings must be quashed. It is a settled position that the reasons furnished at the first instance to an assessee have to be looked into and the same cannot be improvised subsequently. In any case in the documents annexed to the affidavit in reply the respondents have annexed reasons for reopening which differ from those reproduced in the draft order. On a comparison of the reasons filed along with the reply and the reasons as reproduced in the draft assessment order in the reasons annexed to the reply there are 5 crucial paragraphs which are absent in the reasons reproduced in the draft order namely paras 1 2 3 4 and 5. It is a settled position that the reasons furnished to the assessee have only to be seen and the officer cannot supply different reasons in the affidavit of reply. The reasons appearing in the draft assessment order and to the reply filed by the respondent do not disclose what are the facts which the Petitioner has not disclosed and which were necessary for the assessment. In the absence of this statement in the reasons recorded the impugned proceedings are required to be quashed and set aside as being without jurisdiction. Admittedly there is also no dispute that the issue of guarantee fee is pending before the Tribunal since an addition was made on this count in the original assessment proceedings. As per third proviso to section 147 if the subject matter is pending before the Appellate Authority then the assessing officer is debarred from initiating the reassessment proceedings on that very issue. In the instant case even on account of third proviso to section 147 the impugned proceedings are without jurisdiction. It is also important to note that the fact that the issue of guarantee fee is pending before the Tribunal in the petitioner s appeal clearly shows that this issue was examined in the course of the original assessment proceedings. Therefore in the absence of any fresh tangible material the impugned proceedings would amount to a change of opinion for reviewing the earlier order which is not permissible under the Act. The jurisdictional requirement is that the reassessment proceedings can be initiated if any income has escaped the assessment. In the instant case the issue of the guarantee fee has been added to the assessment order passed under section 143 (3) r/w. 144C(13) of the Act. If that be so we fail to understand as to how the said issue would amount to having escaped the assessment. Therefore even on this count the impugned proceedings and the approval granted to such proceedings are wholly without jurisdiction. Therefore to summarise because there was disclosure there was enquiry and because there was enquiry there was addition and because there was addition issue is pending before the Tribunal in appeal and therefore none of the jurisdictional condition can be said to have been satisfied for exercising powers u/s 147 of the Act and consequent reassessment order to survive. We note that the petitioner has filed an appeal after filing the present petition to obviate the limitation period and since as held by us above the reassessment proceedings are wholly without jurisdiction we exercise our discretion to entertain the present petition and quash the reassessment notice u/s 148 and consequently the assessment order passed - Decided in favour of assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The primary legal issues considered in this judgment are:

- Whether the reassessment notice under Section 148 of the Income-tax Act, 1961, issued for the assessment year 2014-15, is valid given it was issued after four years from the end of the relevant assessment year.

- Whether the reassessment proceedings are barred by the third proviso to Section 147 of the Act, given that the issue of "guarantee fees" is pending before the Tribunal.

- Whether the reassessment proceedings amount to a change of opinion in the absence of fresh tangible material.

- Whether the reassessment proceedings satisfy the jurisdictional conditions set under Section 147 of the Act.

2. ISSUE-WISE DETAILED ANALYSIS

Reassessment Notice Validity:

- Legal Framework: Section 147 of the Income-tax Act allows reassessment if income has escaped assessment, provided the conditions are met. The first proviso restricts reassessment after four years unless there is a failure to disclose material facts.

- Court's Interpretation: The Court noted that the reasons for reopening did not allege any failure on the part of the petitioner to disclose material facts fully and truly. The absence of such an allegation in the reasons furnished to the petitioner invalidates the reassessment notice.

- Application of Law to Facts: The Court emphasized that the reasons furnished initially must be examined, and no subsequent improvisation is permissible.

- Conclusion: The reassessment notice was quashed due to the absence of allegations of failure to disclose material facts.

Bar on Reassessment Due to Pending Tribunal Proceedings:

- Legal Framework: The third proviso to Section 147 prohibits reassessment on issues pending before an appellate authority.

- Court's Interpretation: The Court acknowledged that the issue of "guarantee fee" was pending before the Tribunal, thus barring reassessment on the same issue.

- Conclusion: The reassessment proceedings were deemed without jurisdiction due to the pending Tribunal proceedings.

Change of Opinion:

- Legal Framework: Reassessment based on a change of opinion is not permissible under the Act.

- Court's Interpretation: The Court found no fresh tangible material to justify reopening the case, indicating a mere change of opinion.

- Conclusion: The proceedings were quashed as they amounted to a change of opinion.

Jurisdictional Conditions for Reassessment:

- Legal Framework: Section 147 requires that income must have escaped assessment for reassessment to proceed.

- Court's Interpretation: The Court highlighted that the issue of "guarantee fee" was already considered in the original assessment, negating the claim of escaped assessment.

- Conclusion: The reassessment proceedings lacked jurisdictional basis and were quashed.

3. SIGNIFICANT HOLDINGS

- Core Principles Established: The judgment reinforced that reassessment notices must strictly adhere to statutory requirements, including the necessity of alleging failure to disclose material facts when issued after four years. It also emphasized that issues under appeal cannot be grounds for reassessment.

- Final Determinations: The Court quashed the reassessment notice and the subsequent order, citing a lack of jurisdiction and improper adherence to statutory conditions.

- Verbatim Quotes: The Court stated, "The reasons furnished at the first instance to an assessee have to be looked into, and the same cannot be improvised subsequently." This highlights the importance of the initial reasons provided for reopening assessments.