2010 (1) TMI 41 - HC - Income Tax

Invalid notice under Section 148 for reassessment; assessee not at fault; original facts disclosed.

The court held that the notice issued under Section 148 of the Income Tax Act to reopen the assessment was invalid as the assessee had not failed to ... Reopening of an assessment – notice u/s 148 – challenge under constitutional article 226 - The dispute before the Court in these proceedings pertains to assessment year 2003-04 in respect of which for project IIA and Project IIB, a deduction was sought under Section 80IB(10). An assessment order was passed under Section 143(3) on 30th December 2005. The Assessing Officer, while allowing the deduction under Section 80IB(10) in respect of projects IIA and IIB noted that no deduction has been claimed for phases I and III, which were outside the time period prescribed by the statutory provision. On 31st March 2009, a notice was issued to the assessee by the Assistant Commissioner of Income u/s 148 – held that - Since the documents on the basis of which assessment was sought to be reopened had already been furnished to the Assessing Officer in the course of the proceedings under Section 143(3), it cannot possibly be contended that the assessee had failed to disclose documents or the material facts. - to the provisions of Section 148 read with Section 147 cannot be sustained Issues Involved:1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.2. Whether the assessee failed to disclose fully and truly all material facts necessary for assessment.3. Jurisdiction of the Assessing Officer to reopen the assessment beyond four years.Issue-Wise Detailed Analysis:1. Validity of the Notice Issued Under Section 148 of the Income Tax Act, 1961:The primary issue in this case is the challenge to the validity of a notice issued by the Assistant Commissioner of Income Tax under Section 148, seeking to reopen the assessment for the assessment year 2003-04. The notice was issued on the grounds that there was reason to believe that the income of the assessee had escaped assessment. The reason provided was that the Joint Commissioner of Income Tax had furnished an intimation indicating that the claim of deduction under Section 80IB was incorrect since the commencement certificate was issued before the permissible date.2. Whether the Assessee Failed to Disclose Fully and Truly All Material Facts Necessary for Assessment:The court examined whether the assessee had disclosed all material facts necessary for assessment. The assessee argued that a full disclosure was made during the original assessment proceedings, including the submission of commencement certificates and reliance on a circular from the Central Board of Direct Taxes. The court noted that the Assessing Officer was aware of the facts that the deduction under Section 80IB(10) was claimed only for projects that commenced after the prescribed date. The court found that there was no failure on the part of the assessee to disclose all material facts fully and truly.3. Jurisdiction of the Assessing Officer to Reopen the Assessment Beyond Four Years:Section 147 of the Income Tax Act allows the Assessing Officer to reopen an assessment if there is reason to believe that income has escaped assessment. However, the proviso to Section 148 stipulates that no action can be taken after four years from the end of the relevant assessment year unless the income escaped assessment due to the failure of the assessee to disclose fully and truly all material facts. In this case, the notice for reassessment was issued after the expiry of four years. The court found that the primary material (commencement certificates) was already within the knowledge of the Assessing Officer during the original assessment, and there was no failure on the part of the assessee to disclose material facts. Thus, the jurisdictional condition precedent to reopen the assessment was not met.Conclusion:The court concluded that the conditions for reopening the assessment under Section 148 read with Section 147 were not satisfied. The court held that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Consequently, the notice dated 31st March 2009 was set aside, and the petition was allowed. There was no order as to costs.