2014 (2) TMI 121 - HC - Income Tax

Court invalidates reassessment notice for exceeding time limit and lack of disclosure, emphasizing jurisdictional failure under Income Tax Act.

The court quashed the reassessment notice issued under section 148 of the Income Tax Act, 1961, as it was beyond the four-year period from the original ... Notice for reassessment u/s 147 of the Act – Held that:- Notice under section 148 of the Act has been issued on 27/4/2011 in relation to the Assessment Year 2005- 06 – it has been issued after expiry of a period of four years from the end of the relevant assessment year – as per section 147 of the Act, where assessment has been framed under section 143(3) of the Act, no action can be taken under section 147, unless income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for the assessment year - there is not even a whisper to the effect that income has escaped assessment on account of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment. There is no allegation of any such failure on the part of the petitioner - the requirement of the proviso to section 147 are not satisfied - in absence of any satisfaction having been recorded by the Assessing Officer that the income has escaped by reason of the failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the Assessment Year under consideration, assumption of jurisdiction under section 147 of the Act is failure – thus, the notice under section 147 of the Act cannot be sustained – Decided in favour of Assessee. Issues:Challenge to reassessment notice under section 147 of the Income Tax Act, 1961 beyond the four-year period from the original assessment year.Analysis:The petitioner filed original Returns of Income for the AY 2005-06, which were duly processed under section 143(1) of the Act. Subsequently, the case underwent scrutiny assessment, resulting in an Assessment Order under section 143(3) of the Act. The respondent then issued a notice under section 148 of the Act on 27/4/2011, reopening the assessment for AY 2005-06 after a four-year period from the original assessment. The petitioner requested reasons for reassessment, raised objections, and requested to drop the proceedings. However, the respondent disposed of the objections without addressing the contentions raised by the petitioner.The petitioner contended that the reassessment notice was without jurisdiction as there was no failure on their part to disclose all material facts necessary for assessment. The petitioner argued that full disclosure was made, and the issue under reassessment was already considered during the original assessment. The petitioner also challenged the reassessment on merits, but the court did not delve into this aspect due to the lack of satisfaction regarding the conditions for reassessment under section 148 of the Act.The court noted that the notice under section 148 was issued after the four-year period and that no income had escaped assessment due to the petitioner's failure to disclose material facts. The court highlighted the lack of satisfaction by the Assessing Officer regarding such failure, rendering the assumption of jurisdiction under section 147 of the Act invalid. Citing a previous case, the court quashed and set aside the notice of reassessment under section 148 of the Act.In conclusion, the court allowed the petition, quashing the impugned notice dated 27/4/2011. The court emphasized that the conditions for reassessment as provided under section 148 of the Act were not met, leading to the success of the petition. No costs were awarded in the case.