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of <h1>Reassessment Under Sections 147 and 148 Invalid Where No Failure to Disclose, Mere Change of Opinion</h1> HC quashed the reassessment proceedings initiated under Section 148, holding that the jurisdictional conditions under the proviso to Section 147 were not ... Validity of notice under Section 148 - reopening of assessment - Failure or omission on the part of the assessee to disclose fully and truly material facts - Held That:- The original assessment proceedings, the Assessing Officer had considered and examined whether or not the non-compete fee payment was of capital or revenue nature. The Assessing Officer accepted the stand of the assessee and treated the non-compete fee as a revenue expenditure. The re-assessment proceedings cannot, therefore, be initiated on the ground that the Assessing Officer was legally wrong and had misapplied and wrongly understood the law/legal position. In the present case, it is noticeable that the assessee had disclosed fully and truly all material facts relevant for the assessment. The reasons recorded above do not disclose or state that there was failure or omission to disclose fully and truly all material facts. There is no indication and it is not alleged that there was some material or information available on record when reasons to reopen were recorded, to show that the assessee had concealed or had not disclosed fully and truly all material facts. The material facts were on record and had been disclosed by the asssesee. The factual matrix above indicates that the Revenue verily believes that the Assessing Officer had drawn a wrong legal inference and a conclusion, which it is submitted is incorrect. In these circumstances, it has to be held that the re-assessment proceedings have not been validly initiated as the condition of the proviso to Section 147 is not satisfied. Issues:1. Validity of notice under Section 148 dated 01.02.20102. Dismissal of objections to re-opening in the order dated 16.9.20103. Failure to disclose fully and truly material facts for reassessmentAnalysis:Issue 1: Validity of notice under Section 148 dated 01.02.2010The petitioner challenged the notice under Section 148 dated 01.02.2010 and the subsequent order dismissing objections to re-opening. The reasons for re-opening the assessment for the assessment year 2003-04 were based on the claim and allowance of a deduction of non-compete fees as revenue expenditure. The Assessing Officer believed that this should have been capitalized and added back to the income of the assessee. The petitioner contended that the taxability of the non-compete fee was examined before the original assessment order was passed.Issue 2: Dismissal of objections to re-opening in the order dated 16.9.2010The petitioner argued that the issue of taxability of the non-compete fee was specifically addressed before the original assessment order was finalized. The petitioner provided a detailed letter in response to queries raised by the Assessing Officer, explaining the tax treatment of the non-compete fee as per the relevant provisions of the Income Tax Act. The Assessing Officer had considered this issue during the original assessment proceedings, as evidenced by a detailed letter addressing the audit objection raised regarding the treatment of the non-compete fee as capital expenditure.Issue 3: Failure to disclose fully and truly material facts for reassessmentThe court emphasized that if the Assessing Officer had already considered and examined a particular aspect during the original assessment proceedings, reassessment cannot be initiated based on the same ground. The court held that the Assessing Officer had accepted the stand of the assessee regarding the treatment of the non-compete fee as a revenue expenditure during the original assessment. It was concluded that the reassessment proceedings were not validly initiated as there was no failure or omission to disclose fully and truly all material facts by the assessee.In conclusion, the court allowed the writ petition, quashing the notice under Section 148 dated 01.02.2010 and the order dated 16.9.2010 passed by the Assessing Officer, as the reassessment proceedings were found to be invalid due to the absence of jurisdictional pre-conditions for re-opening the assessment.
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