Invalid Notice under Section 148: Lack of Jurisdiction, Change of Opinion

The court held that the notice issued under section 148 of the Income Tax Act for assessment year 2011-12 was unsustainable as it was based on a mere change of opinion and lacked jurisdiction due to being beyond the four-year period. The court concluded that there was no failure to disclose material facts or file a return, rendering the reopening of assessment invalid. Consequently, the petition was allowed, and the notice was quashed with no costs awarded.

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Issues:
Validity of notice under section 148 of the Income Tax Act, 1961 for assessment year 2011-12.

Analysis:
The petitioner, a partnership firm, challenged the validity of the notice dated 25.3.2017 issued by the respondent under section 148 of the Income Tax Act, 1961. The petitioner had filed its return of income for assessment year 2011-12 on 30.4.2012. The Assessing Officer completed the regular assessment under section 143(3) of the Act on 4.3.2014. Subsequently, the respondent issued the impugned notice under section 148 of the Act, proposing to reassess the total income of the petitioner for assessment year 2011-12. The petitioner objected to the reopening of assessment, which was rejected by the respondent. The petitioner argued that the notice issued on 25.3.2017, beyond four years from the relevant assessment year, lacked jurisdiction as there was no failure to disclose all material facts. The petitioner contended that the reopening was based on a mere change of opinion, rendering the notice unsustainable in law.

The reasons recorded for reopening the assessment highlighted that certain expenses were paid in cash exceeding the limit specified under section 40A(3) of the Act, leading to underassessment of income. However, during the scrutiny assessment proceedings under section 143(3) of the Act, the Assessing Officer had already examined the details of expenses submitted by the petitioner, including cash payments to different parties, without making any disallowance under section 40A(3) of the Act. The court observed that the reopening of assessment based on the same issue indicated a mere change of opinion, further invalidating the impugned notice.

The court analyzed the legal provisions under section 147 of the Act and concluded that the first proviso to section 147 would be attracted in this case as the assessment was sought to be reopened beyond the stipulated four-year period. The court emphasized that for the reopening of assessment, either there should be an income chargeable to tax that escaped assessment due to failure on the part of the petitioner, or there should be a failure to disclose all material facts necessary for assessment. In this case, neither condition was satisfied, as there was no failure to file a return or disclose material facts. Therefore, the court held that the assumption of jurisdiction by the Assessing Officer under section 147 of the Act after four years from the relevant assessment year lacked legal authority.

In conclusion, the court found that the impugned notice dated 25.3.2017 under section 148 of the Act for assessment year 2011-12 was unsustainable on both counts. The petition was allowed, and the notice was quashed and set aside, with no order as to costs.

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