Court invalidates notice under Section 148 of Income Tax Act, citing lack of jurisdiction and disclosure of material facts

The Court held that the notice under Section 148 of the Income Tax Act lacked jurisdiction as it was based on a change of opinion rather than new tangible material. The reopening of the assessment beyond four years was also deemed invalid as the reasons for reassessment were already examined during the original assessment. The Court concluded that the petitioner had fully and truly disclosed all material facts necessary for assessment. Consequently, the Court quashed the notice and order, allowing the petition with no order as to costs.

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Issues Involved:
1. Jurisdiction of the notice under Section 148 of the Income Tax Act, 1961.
2. Validity of reopening the assessment beyond four years.
3. Alleged failure to disclose material facts fully and truly.

Detailed Analysis:

1. Jurisdiction of the Notice under Section 148:

The petitioner challenges the notice dated 28 March 2013 issued by the Assessing Officer under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the Assessment Year 2006-07. The petitioner contends that the notice lacks jurisdiction as it does not indicate any tangible material to support the belief that income chargeable to tax has escaped assessment. The Court emphasizes that the power of reassessment under the Act is not a power to review. The Assessing Officer must have a "reason to believe" based on tangible material, not merely change of opinion. The Court finds that the reasons for reopening rely on the same material that was or should have been examined during the original assessment, thus constituting a change of opinion rather than a new tangible material.

2. Validity of Reopening the Assessment Beyond Four Years:

The petitioner argues that the reopening is beyond the period of four years from the end of the relevant Assessment Year, making the notice without jurisdiction. The Court notes that for reopening beyond four years, two preconditions must be satisfied: (a) the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment based on tangible material, and (b) there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The Court finds that the material forming the basis for the reason to believe was already available and examined during the original assessment. Therefore, there is no new tangible material, and the reopening is merely a change of opinion.

3. Alleged Failure to Disclose Material Facts Fully and Truly:

The revenue contends that the petitioner failed to disclose fully and truly all material facts necessary for assessment, particularly regarding the allocation of expenses between the 80IB unit (Silvasa) and the non-80IB unit (Tarapur). The Court finds that the petitioner had disclosed the allocation of expenses in its profit and loss accounts, which was subject to examination during the original assessment. The Court rejects the revenue's argument that the petitioner was obliged to disclose alternative methods of expense allocation. The Court concludes that the petitioner had disclosed all material facts necessary for assessment, and any alleged inappropriate allocation of expenses was accepted by the Assessing Officer during the original assessment.

Conclusion:

The Court holds that the notice dated 28 March 2013 under Section 148 and the order dated 1 August 2013 rejecting the petitioner's objections are bad in law. The reopening of the assessment is based on a change of opinion and not on new tangible material. The petitioner had disclosed all material facts fully and truly during the original assessment. Therefore, the impugned notice and order are quashed and set aside. The petition is allowed, and the rule is made absolute with no order as to costs.

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