2000 (8) TMI 45 - HC - Income Tax

Reassessment notices under sections 147/148 invalid where proviso bars reassessment absent failure to file or non-disclosure

Foramer Versus Commissioner Of Income-Tax And Another

HC held the reassessment notices issued under sections 147/148 were invalid. Applying the law as of the notice date (Nov 20, 1998), the new section 147's ... Validity of notice issued under section 148 - taxability in respect of income accrued or deemed to accrue in India - double taxation avoidance agreement - HELD THAT:- In our opinion, we have to see the law prevailing on the date of issue of the notice under section 148, i.e., November 20, 1998. Admittedly, by that date, the new section 147 has come into force and, hence, in our opinion, it is the new section 147 which will apply to the facts of the present case. In the present case, there was admittedly no failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment. Hence, the proviso to the new section 147 squarely applies, and the impugned notices were barred by limitation mentioned in the proviso. Although we are of the opinion that the law existing on the date of the impugned notice under section 147/148 has to be seen, yet even in the alternative even if we assume that the law prior to the insertion of the new section 147 will apply even then it will make no difference since even under the original section 147 notice for reassessment could not be given on the mere change of opinion as held in numerous cases of the Supreme Court, some of which have been mentioned above. Since the Tribunal in the appeal relating to the assessee-company had considered the Tribunal's earlier decision in Boudier Christian's case, it will obviously amount to mere change of opinion, and hence the notice under section 147/148 would be illegal. Issues Involved:1. Validity of the notice issued u/s 148 of the Income-tax Act, 1961.2. Applicability of the amended section 147 of the Income-tax Act.3. Jurisdiction of the Income-tax authorities to reopen assessments after four years.4. Impact of the Tribunal's decision in Boudier Christian's case on the petitioner's case.5. Availability of alternative remedy for the petitioner.Summary of Judgment:1. Validity of the notice issued u/s 148 of the Income-tax Act, 1961:The petitioner challenged the notice dated November 20, 1998, issued u/s 148 for the assessment year 1988-89, arguing that it was issued arbitrarily and did not meet the conditions of section 147. The court found that the petitioner had fully disclosed all material facts in the original return, and the notice was issued merely due to a change of opinion by the Department, which is not valid for reopening assessments.2. Applicability of the amended section 147 of the Income-tax Act:The court noted that the new section 147, effective from April 1, 1989, requires the Assessing Officer to have reason to believe that income has escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The court held that the new section 147 applies to the case, and since the petitioner had made full disclosures, the notice was barred by limitation.3. Jurisdiction of the Income-tax authorities to reopen assessments after four years:The court emphasized the proviso to section 147, which bars reopening assessments after four years unless there is a failure to disclose material facts by the assessee. Since the petitioner had disclosed all necessary facts, the court ruled that the notice u/s 148 was issued beyond the permissible period and was thus invalid.4. Impact of the Tribunal's decision in Boudier Christian's case on the petitioner's case:The Department argued that the Tribunal's decision in Boudier Christian's case justified the reassessment. However, the court found that the decision pertained to the taxability of an expatriate employee's income and not the corporate income of the petitioner. Therefore, the Tribunal's decision did not provide a valid basis for reopening the petitioner's assessment.5. Availability of alternative remedy for the petitioner:The court rejected the Department's argument that the petitioner should seek alternative remedies before the income-tax authorities. It held that since the notice u/s 148 was without jurisdiction, the petitioner was not required to pursue alternative remedies.Conclusion:The court allowed the writ petition and quashed the impugned notices, holding that the notices were issued without jurisdiction and were barred by limitation. The court emphasized that the reassessment was based on a mere change of opinion, which is not permissible under the law.