2017 (5) TMI 429 - HC - Income Tax

High Court rules notice under Section 148 invalid, stresses importance of disclosing material facts

The High Court analyzed a challenge to a notice issued under Section 148 of the Income Tax Act, 1961 and the subsequent rejection of objections against ... Reopening of assessment - reasons to believe - Held that:- There is no finding or the reason recorded by the Assessing Authority that the petitioner had failed to disclose fully and truly all material facts, which were necessary for the assessment. The petitioner admittedly had submitted the complete details of the lease rent paid to the Greater NOIDA Industrial Development Authority during the financial year and that he had not deducted any tax at source. No material in this regard was suppressed by the petitioner and at the same time, no incorrect disclosure in that regard was made by it. The above disclosure was well within the knowledge of the Assessing Officer during the regular assessment proceedings. In view of the above, the second condition as laid down in the proviso to Section 147 of the Act regarding non disclosure of full and true particulars necessary for assessment was not satisfied for issuing the notice under Section 148 of the Act after the expiry of four years from the end of the relevant assessment year. - Decided in favour of assessee. Issues:Challenge to notice under Section 148 of the Income Tax Act, 1961 and rejection of objections against the notice.Analysis:The petitioner challenged a notice dated 31.3.2015 issued under Section 148 of the Income Tax Act, 1961 for the assessment year 2008-09 and the subsequent order dated 4.2.2016 rejecting objections against the notice. The petitioner contended that the notice was without jurisdiction and barred by limitation, as the reason provided did not fulfill the mandatory conditions under Section 147 of the Act. The respondent argued that the notice was within the period of limitation and proper sanction was obtained. The court examined the maintainability of the writ petition, citing precedents where participation in objection filing did not preclude invoking writ jurisdiction. The court emphasized the plenary nature of Article 226 powers for cases involving jurisdictional issues or non-compliance with statutory provisions.The court delved into the provisions of Section 147 of the Act, highlighting the conditions for reassessment. It outlined that the Assessing Officer must have a reason to believe income escaped assessment and that the assessee failed to disclose material facts. The court clarified that both conditions are mandatory for reassessment beyond four years. Sections 149 and 151 were discussed regarding the limitation period for issuing notices under Section 148. The court noted that the notice in question was issued on the last day of the extended limitation period, with satisfaction recorded by the Principal Commissioner.The court scrutinized the reasons for initiating proceedings under Section 147, finding that the document cited by the respondent did not establish non-disclosure of material facts by the petitioner. It was observed that the petitioner had provided complete details during regular assessment proceedings, and no suppression or incorrect disclosure occurred. The court referenced a prior Division Bench decision to support its stance that failure to disclose fully and truly material facts renders reassessment proceedings after the initial period not maintainable.The court dismissed the argument that the order rejecting objections could supplement the reasoning for issuing the notice. It concluded that the non-deduction of TDS did not amount to non-disclosure of full particulars necessary for assessment. Consequently, the court quashed the notice dated 31.3.2015 and the order rejecting objections dated 4.2.2016. The petition was allowed with no costs awarded.