2013 (6) TMI 312 - HC - Income Tax

Court Quashes Section 148 Notices for Re-opening Assessments

The court quashed the notices under section 148 for re-opening assessments for multiple assessment years. It ruled that the Assessing Officer did not meet ... Reassessment - validity of notice issued u/s 148 - recording of satisfaction - held that:- the entire approach of the Assessing Officer is throughly misconceived. The Assessing Officer has ignored the binding precedents on the subject to which his attention was drawn. All that the Assessing Officer has stated is that the form of the notice under section 148 which is prescribed by the CBDT does not contain any provision to the effect that the assessee has failed to disclose fully and truly all material facts necessary for the assessment. This is a clear dereliction on the part of the Assessing Officer to follow the mandatory requirements of the proviso to section 147. Again the Assessing Officer sought to explain away her failure to record a satisfaction of the requirement of the proviso to section 147 by stating that this was a typographical error. The omission to state a jurisdictional fact cannot by any stretch of imagination be regarded as a typographical error. Assessing Officer has in purporting to re-open the assessment acted in clear breach of the mandate of the law and of the jurisdictional condition prescribed by the proviso to section 147. - Decided in favor of assessee. Issues Involved:1. Validity of notices issued under section 148 of the Income-tax Act, 1961 for re-opening assessments.2. Jurisdictional requirements for re-opening assessments beyond four years under section 147.3. Assessment of the petitioner's eligibility for deductions under section 80IB of the Income-tax Act, 1961.4. Examination of whether the re-opening of assessments was based on a change of opinion.Issue-wise Detailed Analysis:1. Validity of Notices Issued Under Section 148 of the Income-tax Act, 1961 for Re-opening Assessments:The Petitioner challenged the validity of the notices issued under section 148 on 29 March 2012, which aimed to re-open assessments for the Assessment Years (A.Ys.) 2005-06, 2006-07, 2007-08, and 2008-09. The re-opening for A.Ys. 2005-06 and 2006-07 occurred beyond the period of four years from the relevant assessment years, while the re-opening for A.Ys. 2007-08 and 2008-09 was within four years. The reasons for re-opening were similar across all years.2. Jurisdictional Requirements for Re-opening Assessments Beyond Four Years Under Section 147:The court noted that under section 147, an assessment can only be re-opened if there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. This jurisdictional requirement must be indicated in the reasons furnished to the assessee. The reasons disclosed by the Assessing Officer for A.Ys. 2005-06 and 2006-07 did not indicate any failure by the assessee to disclose material facts, thus failing to meet the jurisdictional requirements. The court emphasized that the Assessing Officer cannot improve upon the reasons for re-opening the assessment or bridge the lacunae later.3. Assessment of the Petitioner's Eligibility for Deductions Under Section 80IB of the Income-tax Act, 1961:The Petitioner, a manufacturer of various products, had claimed deductions under section 80IB for several years. The original assessments for A.Ys. 2005-06 and 2006-07 were conducted under section 143(3), where detailed inquiries were made, and the deductions were allowed. The court found that the Assessing Officer had duly verified the eligibility for the deductions during the original assessments. The re-opening notices failed to provide new or tangible facts that would justify re-assessment.4. Examination of Whether the Re-opening of Assessments Was Based on a Change of Opinion:For A.Ys. 2007-08 and 2008-09, the re-opening notices were within four years. However, the court highlighted that the original claim for deduction under section 80IB was allowed for A.Y. 2004-05, and the re-opening of assessments for subsequent years (2005-06 and 2006-07) was found unsustainable. The court referred to the Supreme Court's judgment in CIT v. Kelvinator of India Ltd., which stated that re-opening assessments based on a mere change of opinion is not permissible. The court concluded that the re-opening of assessments for A.Ys. 2007-08 and 2008-09 amounted to a change of opinion and was therefore unsustainable.Conclusion:The court quashed and set aside the notices under section 148 for re-opening the assessments for A.Ys. 2005-06, 2006-07, 2007-08, and 2008-09. The court ruled that the Assessing Officer failed to meet the jurisdictional requirements for re-opening assessments beyond four years and that the re-opening for A.Ys. 2007-08 and 2008-09 was based on a change of opinion, which is not permissible. The petitions were allowed, and the rule was made absolute with no order as to costs.