Court rules notices to reopen assessments under Section 148 of Income Tax Act as lacking jurisdiction. Petitions allowed.

The court held that the notices issued by the Assessing Officer under Section 148 of the Income Tax Act, seeking to reopen assessments for the assessment years 2004-05 and 2005-06, were without jurisdiction as they did not demonstrate a failure to disclose fully and truly all material facts necessary for assessment. The court ruled in favor of the petitioners, stating that the primary requirement for issuing the notices was not satisfied. As a result, both petitions were allowed, and the rule was made absolute with no order as to costs.

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Issues Involved:
1. Validity of reopening assessments beyond the period of four years.
2. Failure to disclose fully and truly all material facts necessary for assessment.
3. Alleged suppression of book profits due to higher depreciation claims.
4. Jurisdiction of the Assessing Officer under Section 148 of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of Reopening Assessments Beyond Four Years:
The petitions challenge the notices dated 22/03/2011 issued by the Assessing Officer under Section 148 of the Income Tax Act, 1961, seeking to reopen the petitioner's assessments for the assessment years 2004-05 and 2005-06. The notices were issued beyond the period of four years from the end of the relevant assessment year. The court emphasized that for reopening assessments beyond four years, it is mandatory that there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.

2. Failure to Disclose Fully and Truly All Material Facts:
The petitioner argued that all material facts necessary for assessment were fully and truly disclosed in their return of income. The reasons recorded for reopening the assessments did not allege any failure to disclose material facts. The court noted that the reasons for reopening were based on information already disclosed by the petitioner in its profit and loss account and balance sheet. The court referenced the case of Allanasans Ltd. Vs. Dy. CIT, stating that the absence of the words "failure to disclose" is not fatal, but the reasons must indicate a failure to disclose fully and truly all material facts. In this case, the reasons did not suggest any such failure.

3. Alleged Suppression of Book Profits Due to Higher Depreciation Claims:
The Assessing Officer claimed that the petitioner's higher depreciation charge led to a suppression of book profits, resulting in lower tax payable under Section 115JB of the Act. The petitioner contended that the higher depreciation was disclosed and approved by statutory auditors and the general body of shareholders. The court found that the reasons recorded for reopening did not indicate any false declaration or suppression of facts. The court highlighted that claiming a particular amount as depreciation, whether eligible or not, is different from not disclosing fully and truly material facts necessary for assessment.

4. Jurisdiction of the Assessing Officer Under Section 148:
The court reiterated that the jurisdictional requirement for issuing a notice under Section 148 beyond four years includes both the belief that income chargeable to tax has escaped assessment and a failure to disclose fully and truly all material facts necessary for assessment. Since the reasons recorded did not allege any failure to disclose material facts, the court held that the primary requirement for issuing the notices was not satisfied, rendering the notices without jurisdiction.

Conclusion:
The court ruled that the impugned notices dated 22/03/2011 were issued without jurisdiction as they did not satisfy the requirement of failure to disclose fully and truly all material facts necessary for assessment. Consequently, the court did not consider the other issues raised by the petitioners. Both petitions were allowed, and the rule was made absolute with no order as to costs.

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