Case Note & Summary
The petitioner, 3i Infotech Limited, challenged a notice dated 18 March 2009 issued by the Assistant Commissioner of Income Tax seeking to reopen the assessment for assessment year 2002-2003 under Section 147 of the Income Tax Act, 1961. The assessee had filed its return on 30 October 2002 declaring a loss and computed tax under Section 115JB. An assessment order under Section 143(3) was passed on 7 March 2005. The reopening notice was issued beyond four years from the end of the relevant assessment year. The reasons recorded for reopening stated that the assessee had engaged its wholly owned subsidiary, ICICI Infotech Inc. USA, for market development and sales support, and had treated certain remuneration as deferred revenue expenditure over two years. The court noted that the assessee had disclosed all material facts in the notes to accounts and during the original assessment proceedings. The Assessing Officer had examined the issue and accepted the treatment. The court held that the reopening was based on a mere change of opinion and that there was no failure on the part of the assessee to disclose material facts. Consequently, the notice for reopening was quashed and set aside. The court allowed the writ petition with no order as to costs.
Headnote
A) Income Tax - Reopening of Assessment - Section 147, Income Tax Act, 1961 - Reassessment beyond four years - The assessee had disclosed all material facts in the original return and assessment proceedings. The Assessing Officer sought to reopen the assessment based on the same facts, which constituted a change of opinion. Held that reopening beyond four years is invalid without proof of failure to disclose material facts (Paras 2-6).
Issue of Consideration
Whether a notice for reopening an assessment beyond four years from the end of the relevant assessment year is valid when the assessee had disclosed all material facts and the reopening is based on a change of opinion.
Final Decision
Writ petition allowed. Notice dated 18 March 2009 under Section 148 of the Income Tax Act, 1961 quashed and set aside. Rule made absolute. No order as to costs.
Law Points
- Reopening of assessment beyond four years requires failure to disclose material facts
- Change of opinion not sufficient for reopening
- Section 147 Income Tax Act
- 1961
Case Details
2010 LawText (BOM) (06) 29
Writ Petition No.892 of 2010
Dr. D.Y. Chandrachud, J.P. Devadhar
Mr. Percy J. Pardiwala, Senior Advocate with Mr. Atul K. Jasani for petitioner; Mr. Vimal Gupta for respondents
Assistant Commissioner of Income Tax – 10(3), Commissioner of Income Tax – 10, Union of India
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Nature of Litigation
Writ petition challenging notice for reopening of income tax assessment.
Remedy Sought
Petitioner sought quashing of notice dated 18 March 2009 issued under Section 148 of the Income Tax Act, 1961.
Filing Reason
Notice for reopening assessment for AY 2002-2003 beyond four years based on alleged change of opinion.
Previous Decisions
Original assessment completed under Section 143(3) on 7 March 2005.
Issues
Whether the notice for reopening assessment beyond four years is valid without proof of failure to disclose material facts.
Whether the reopening is based on a mere change of opinion.
Submissions/Arguments
Petitioner argued that all material facts were disclosed and reopening is based on change of opinion.
Respondents argued that the assessee failed to disclose material facts regarding deferred revenue expenditure.
Ratio Decidendi
Reopening of assessment beyond four years from the end of the relevant assessment year requires the Assessing Officer to establish that the assessee failed to disclose material facts. Where the assessee has disclosed all material facts and the reopening is based on a change of opinion, the notice is invalid.
Judgment Excerpts
The dispute in these proceedings arises out of a notice issued by the first respondent on 18 March 2009 by which an assessment for assessment year 2002-2003 is sought to be reopened in pursuance of the provisions of Section 147 of the Income Tax Act, 1961.
The assessee filed a return of income for assessment year 2002-2003 on 30 October 2002 declaring a loss of Rs.46.96 lakhs and computed tax under Section 115JB of Rs.1.94 crores.
The reasons on the basis of which the assessment is sought to be reopened are stated in the notice and are as follows...
Procedural History
Assessee filed return on 30 October 2002. Assessment under Section 143(3) completed on 7 March 2005. Notice under Section 148 issued on 18 March 2009. Writ petition filed challenging the notice.
Acts & Sections
- Income Tax Act, 1961: 147, 143(3), 148, 115JB
