2008 (12) TMI 9 - HC - Income Tax

Notice under Section 148 and order under Section 147 quashed for lacking allegation of failure to disclose material facts

HC held that the notice under section 148 and consequent order were without jurisdiction and quashed the notice dated 28.03.2008 and set aside the order ... Validity of the notice u/s 148 - payments towards the share application money - failure to disclose material facts fully and truly - allegation that receipts of the share application money were bogus and sham transactions - HELD THAT:- Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147. If this condition is not satisfied, the bar would operate and no action under section 147 could be taken. We have already mentioned above that the reasons supplied to the petitioner does not contain any such allegation. Consequently, one of the conditions precedent for removing the bar against taking action after the said four year period remains unfulfilled. Reiterating our view-point, we hold that the notice dated 29.03.2004 under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated 02.03.2005 are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above.' We feel that the present case is entirely covered by that decision. Consequently, we set aside the order dated 28.11.2008 and quash the impugned notice under Section 148 dated 28.03.2008. Issues Involved:1. Validity of the notice under Section 148 of the Income-tax Act, 1961.2. Alleged failure to disclose material facts fully and truly.3. Assessment of share application money as bogus transactions.4. Jurisdiction of the Assessing Officer to initiate re-assessment proceedings beyond four years.Detailed Analysis:1. Validity of the notice under Section 148 of the Income-tax Act, 1961:The petitioner sought the quashing of the notice dated 28.03.2008 issued under Section 148 of the Income-tax Act, 1961, and the order passed by the Assessing Officer on 28.11.2008. The original assessment was framed under Section 143(3) on 05.03.2003. The Assessing Officer had raised queries regarding the share application money received by the petitioner from Solo-Mio Marketing Pvt Ltd. The petitioner provided detailed responses and supporting documents, including affidavits, bank statements, and confirmations from the investors.2. Alleged failure to disclose material facts fully and truly:The proviso to Section 147 requires that before any action is initiated, it must be shown that the assessee failed to make a true and full disclosure of all material facts. The reasons recorded for reopening the case under Section 148 did not allege that the petitioner failed to disclose all material facts fully and truly. The court noted that the reasons recorded were general and vague.3. Assessment of share application money as bogus transactions:The reasons recorded for reopening the case included information received from the Investigation Wing of the Income-tax Department regarding accommodation entries. The information suggested that the petitioner received accommodation entries amounting to Rs. 8,00,000/- from Solo-Mio Marketing Pvt Ltd. The petitioner had already explained these transactions during the original assessment proceedings, and the Assessing Officer had accepted the explanations and documentary evidence provided.4. Jurisdiction of the Assessing Officer to initiate re-assessment proceedings beyond four years:The court referred to the decision in Haryana Acrylic Manufacturing Company v. CIT, which stated that no action can be taken under Section 147 after four years from the end of the relevant assessment year unless the income chargeable to tax escaped assessment due to the assessee's failure to disclose material facts fully and truly. The court found that the reasons recorded did not contain any allegation of such failure by the petitioner. Consequently, the initiation of re-assessment proceedings was deemed to be without jurisdiction.Conclusion:The court set aside the order dated 28.11.2008 and quashed the impugned notice under Section 148 dated 28.03.2008. The writ petition was allowed, and there was no order as to costs. The court emphasized that the reasons for reopening the assessment did not meet the necessary conditions under the proviso to Section 147, and the re-assessment proceedings were initiated based on a mere change of opinion, which is not permissible.