Court sets aside notice & order, stresses full disclosure for income escapement in reassessment.

The court ruled in favor of the petitioner, setting aside the notice under Section 148 and the order disposing of objections. The judgment emphasized the necessity of full and true disclosure of material facts by the assessee to justify income escapement in reassessment proceedings under Section 147 of the Income Tax Act, 1961.

---

---

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for assessment year 2006-07 regarding Software Licence Fee disallowance as revenue expenditure.

Analysis:
The judgment concerns a writ petition challenging a notice under Section 148 of the Income Tax Act, 1961, issued for the assessment year 2006-07 regarding the treatment of Software Licence Fee. The original assessment allowed only a portion of the fee as revenue expenditure, capitalizing the rest and allowing depreciation at 60%. The petitioner objected to this treatment, leading to an appeal before the Income Tax Appellate Tribunal. The notice under Section 148 was issued after four years from the assessment year, citing the disallowance of the Software Licence Fee as revenue expenditure and proposing to allow depreciation at 25% instead of 60%. The petitioner's objections were rejected, prompting the writ petition.

The court analyzed the reasons provided for invoking Section 147 and found no failure on the petitioner's part to disclose material facts necessary for assessment. Referring to precedent, the court emphasized that for income escapement to justify reassessment, there must be a failure to fully and truly disclose material facts. As the petitioner had disclosed the Software Licence Fee as revenue expenditure during the original assessment, and there was no allegation of non-disclosure, the court held the reassessment proceedings unsustainable in law. The court noted the ongoing appeal before the Income Tax Appellate Tribunal and set aside the notice under Section 148 and the order disposing of objections.

In conclusion, the court ruled in favor of the petitioner, setting aside the notice under Section 148 and the order disposing of objections. The judgment highlighted the importance of full and true disclosure of material facts by the assessee for justifying income escapement in reassessment proceedings under Section 147 of the Income Tax Act, 1961.

---