2025 (2) TMI 548 - HC - Income Tax

Revenue cannot reopen assessment beyond four years without proving assessee failed to disclose material facts under Section 147

Oxford University Press Versus DCIT, Int. Tax Circle 3 (2) (2) & Ors.

Bombay HC quashed reassessment notice u/s 147 for assessment year 2014-15. The court held that reopening assessment beyond four years requires failure by ... Reopening of assessment u/s 147 - rejecting the petitioner’s objection to reopening of the assessment made by the first respondent - HELD THAT:- On perusing the reasons, we find no allegation regarding any failure on the petitioner’s part to fully and truly disclose any material facts necessary for the assessment. Without such an allegation, let alone some material to support such allegation, one of the jurisdictional parameters for reopening of the assessment beyond 4 years could not be said to have been fulfilled. The records show that along with the return of income filed by the petitioner for the assessment year 2014-15, the petitioner had once again submitted a letter dated 16 July 2015 regarding its status as a “resident” company. The records also show that from 1995-96 onwards, the petitioner has been assessed as a “resident” company. The department could not reasonably allege any failure on the petitioner’s part to disclose the material facts regarding the petitioner’s status. Therefore, the reasons do not even contain any allegation of failure to disclose material facts. The assessment order for 2016-17 was made on 31 December 2019. Accordingly, there is no question of the petitioner referring to this assessment order or even imagining that such an order would be made in the future. Thus, based on the reasons furnished to the petitioner as also the other material on record, we are satisfied that the jurisdictional parameter about failure to disclose fully and truly all material facts necessary for assessment are missing. Without compliance with these jurisdictional parameters, the respondents had no jurisdiction to issue impugned notice and proceed with the reopening of the assessment. Merely because there is some change in the tax rate for the future assessment years, the provisions of Section 148 cannot be invoked without the jurisdictional parameters of these Sections being fulfilled. When an assessment is sought to be reopened beyond the period of four years, there must be a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. The retrospective amendment of law by Parliament would negate the inference that is sought to be drawn from the failure to disclose material facts. The facts in the present case are even stronger than those in DIL Ltd. [2012 (2) TMI 85 - BOMBAY HIGH COURT] Although the reasons do not allege a failure to disclose material facts, the other material on record shows that, in fact, there was no failure to disclose material facts. The Bombay High Court considered a case where the petitioner challenged a notice issued under Section 148 of the Income Tax Act, 1961, and an order rejecting the petitioner's objection to the reopening of the assessment for the assessment year 2014-15. The key issue was whether the Assessing Officer had the jurisdiction to reopen the assessment beyond four years based on the failure of the petitioner to disclose all material facts necessary for the assessment.The Court analyzed the reasons furnished for reopening the assessment, which highlighted discrepancies in the petitioner's tax status as a resident or non-resident company. The petitioner had been assessed as a resident company for the relevant year, but the respondents sought to tax the petitioner as a non-resident entity, alleging a short levy of tax. However, the Court found that the reasons did not allege any failure on the petitioner's part to disclose material facts necessary for assessment, a crucial jurisdictional parameter for reopening assessments beyond four years.The Court emphasized that the petitioner had agreed to be assessed as a resident company from assessment year 1995-96 onwards to avoid litigation, and the Assessing Officer had made subsequent assessment orders based on this agreement. The records showed consistent reporting of the petitioner's status as a resident company, and there was no failure to disclose material facts regarding the petitioner's status. Therefore, the Court concluded that the jurisdictional parameters for reopening the assessment were not met, and the notice and order were quashed.In reaching its decision, the Court referred to the case of DIL Ltd. Vs. Assistant Commissioner of Income-tax, highlighting the importance of failure to disclose material facts as a prerequisite for reopening assessments beyond the statutory period. The Court found the present case even stronger than the precedent cited, as there was no failure to disclose material facts despite the retrospective amendment of tax laws by Parliament.Ultimately, the Court quashed the impugned notice and order, clarifying that it did not express any opinion on the merits of the case or the petitioner's residence status. The rule was made absolute without any cost order, bringing the matter to a close.