2013 (2) TMI 20 - HC - Income Tax

Invalidity of Notice under Section 148 of Income Tax Act for Reopening Assessment Year 2005-06

The Delhi High Court ruled that a notice issued under section 148 of the Income Tax Act, 1961 to reopen assessment year 2005-06 was invalid as it exceeded ... Reopening of assessment - disallowance u/s 80-IC could not be made as the conditions as laid down in that section are not fulfilled - Held that:- Notice issued for reopening of assessment is bad in law in this case as the impugned reasons behind the notice dated 28.03.2012 issued after four years from the end of the relevant assessment year as it does not even carry a whisper that there has been a failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment. Even the order rejecting the objections does not indicate as to what material fact has not been disclosed by the assessee - writ petition allowed - in favour of assessee. Issues:1. Validity of notice under section 148 of the Income Tax Act, 1961 for reopening assessment year 2005-06.Analysis:The judgment by the Delhi High Court pertains to a writ petition challenging a notice dated 28.03.2012 issued under section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the year 2005-06. The petitioner had filed objections against the notice, which were subsequently rejected. The notice was issued based on the alleged under-assessment of income due to non-compliance with conditions for disallowance under section 80-IC. The court examined the provisions of section 147 and Explanation 2, emphasizing that the notice was beyond the four-year limitation period unless there was a failure on the part of the assessee to disclose material facts necessary for assessment.The court considered arguments from both parties and concluded that the notice was invalid as it was issued beyond the four-year limit without the assessee failing to disclose material facts. The proviso to section 147 imposes restrictions on the revenue authorities from taking action beyond four years unless there is a failure to disclose necessary facts. The court highlighted that mere escapement of income is not sufficient; there must be a failure to disclose material facts by the assessee. In this case, the court found that the notice did not indicate any failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment.Consequently, the court set aside the impugned notice dated 28.03.2012 and all proceedings following it. The writ petition was allowed, and no costs were awarded. The judgment underscores the importance of adhering to statutory provisions and the necessity for the revenue authorities to establish non-disclosure of material facts by the assessee to justify reopening assessments beyond the prescribed time limit.