1999 (4) TMI 67 - HC - Income Tax

Court quashes notice for reopening assessment beyond limitation period

The Court quashed the notice issued under s. 148 of the IT Act for reopening assessment for the asst. yr. 1987-88. The petitioner successfully challenged ... Writ, Notice, Reassessment, Full And True Disclosure Issues:Challenge to notice under s. 148 of the IT Act for reopening assessment for the asst. yr. 1987-88 based on alleged escapement of income chargeable to tax.Analysis:1. The petitioner challenged the assumption of jurisdiction under s. 148 r/w s. 147, contending that no failure to disclose material facts existed. The AO's reasons for reopening the assessment were based on discrepancies in land purchase and payments made, leading to an alleged escapement of income chargeable to tax.2. The petitioner argued that all material facts were disclosed during the assessment proceedings for the relevant year, negating any failure to disclose by the assessee. The initiation of proceedings under s. 147 beyond four years from the end of the relevant assessment year was deemed unauthorized.3. The petitioner maintained that the inflated cost price of land was due to payments made to the seller and a third party, impacting the profit margin. The AO's belief that income had escaped assessment was founded on these grounds, despite the petitioner's explanation of the chain of events leading to the additional payments.4. The petitioner also alleged collusion between the petitioner and the sellers in inflating the land price, further complicating the assessment process.5. The Court, despite the assessment taking place during the petition's pendency, did not dismiss the petition based on the availability of alternative remedies. The interim order allowed the proceedings to continue but restricted the service and implementation of the final assessment order.6. The Court analyzed the provisions of s. 147 and the limitations imposed by the proviso, emphasizing the necessity of recording satisfaction regarding the assessee's failure to disclose material facts before initiating proceedings under s. 147.7. The Court concluded that the impugned notice issued after the limitation period was beyond the AO's jurisdiction, leading to the quashing of the notice and subsequent proceedings.8. The petition succeeded, and the impugned notice and related proceedings were quashed, with no order as to costs.