2014 (12) TMI 936 - HC - Income Tax

Court quashes notice & reassessment order due to jurisdictional error under Income Tax Act.

Crompton Greaves Ltd. Versus Assistant Commissioner of Income tax & Others

Crompton Greaves Ltd. Versus Assistant Commissioner of Income tax & Others - TMI Issues involved:1. Assumption of jurisdiction under Sections 147 and 148 of the Income Tax Act, 1961.2. Issuance of notice beyond the period of four years.3. Alleged failure to disclose fully and truly all material facts.4. Change of opinion by the Assessing Officer.5. Violation of principles of natural justice and fair play.6. Availability of alternative remedies.Issue-wise detailed analysis:1. Assumption of jurisdiction under Sections 147 and 148 of the Income Tax Act, 1961:The petitioner challenged the assumption of jurisdiction by the Commissioner of Income Tax under Sections 147 and 148 by issuing a notice dated 29 March 2006 and the consequent reassessment order dated 26 December 2006. The court examined whether the conditions for invoking Sections 147 and 148 were met, particularly focusing on whether there was a failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment.2. Issuance of notice beyond the period of four years:The notice under Section 148 was issued after the expiry of four years from the end of the relevant assessment year (1999-00). According to the proviso to Section 147, no action can be taken after four years unless income chargeable to tax has escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The court found that there was neither an allegation nor circumstances indicating such a failure by the petitioner.3. Alleged failure to disclose fully and truly all material facts:The court noted that the reasons for reopening the assessment did not specify any failure on the part of the petitioner to disclose all material facts. The reasons provided were vague and did not indicate which particular facts or materials were not disclosed. The court emphasized that the reasons must be clear and unambiguous, and the absence of specific allegations of non-disclosure rendered the assumption of jurisdiction under Sections 147 and 148 ultra vires.4. Change of opinion by the Assessing Officer:The court observed that the issues raised in the reassessment notice, such as the computation of MAT liability and debiting of capital expenditure, were already considered by the Assessing Officer in the original assessment order dated 21 March 2002. The reassessment was based on a mere change of opinion, which is impermissible under the law.5. Violation of principles of natural justice and fair play:The reassessment order was issued in haste, immediately after the objections raised by the petitioner were disposed of. The court noted that the period between 22 December 2006 and 25 December 2006 were not working days, and the reassessment order was made on the immediate next working day, 26 December 2006. This approach was deemed to violate principles of natural justice and fair play, as the Assessing Officer did not wait for a reasonable period after disposing of the objections before proceeding with the reassessment.6. Availability of alternative remedies:The court addressed the objection that the petitioner should have availed of the ordinary remedies of appeal under the Act. However, given the circumstances, including the issuance of the reassessment order in violation of jurisdictional restraints and principles of natural justice, the court deemed it appropriate to exercise its extraordinary jurisdiction and not reject the petition on the ground of availability of alternative remedies.Conclusion:The court quashed the impugned notice dated 29 March 2006 and the reassessment order dated 26 December 2006, as the assumption of jurisdiction by the Commissioner of Income Tax was found to be ultra vires and in violation of the statutory provisions and principles of natural justice. The petition was allowed, and no order as to costs was made.