Case Note & Summary
The petitioner, ICICI Bank Ltd., challenged a notice dated 30 March 2010 issued by the Deputy Commissioner of Income Tax under Section 148 of the Income Tax Act, 1961 seeking to reopen the assessment for Assessment Year 2003-04. The notice was issued after a period of four years from the end of the relevant assessment year. The petitioner had filed its return of income on 28 November 2003, followed by revised returns on 11 January 2005 and 31 March 2005. The Assessing Officer issued several questionnaires and the assessee filed replies. An assessment order was passed on 28 February 2006. During the assessment, the assessee had claimed a deduction under Section 10(23G) of Rs.124.71 crores, which was allowed to the extent of Rs.53.80 crores. The reasons recorded for reopening stated that the Assessing Officer had allowed the claim without verifying whether the conditions of Section 10(23G) were satisfied, and that income had escaped assessment. However, the reasons did not contain any allegation that the assessee had failed to disclose fully and truly all material facts. The court examined the first proviso to Section 147, which provides that after four years, no action shall be taken unless the income has escaped assessment due to the failure of the assessee to disclose fully and truly all material facts. The court found that the reasons recorded did not contain any whisper of such failure. The court held that the Assessing Officer had no jurisdiction to issue the notice under Section 148 after four years in the absence of an allegation of failure to disclose material facts. The court quashed the notice and allowed the petition.
Headnote
A) Income Tax - Reopening of Assessment - Section 147, first proviso - Section 148 - Income Tax Act, 1961 - Reassessment notice issued after four years from end of assessment year is invalid unless the reasons recorded contain an allegation that the assessee failed to disclose fully and truly all material facts necessary for assessment - The court held that the reasons recorded must explicitly state such failure; mere escapement of income is insufficient to sustain jurisdiction under the proviso (Paras 3, 6-8).
Issue of Consideration
Whether the notice issued under Section 148 of the Income Tax Act, 1961 after four years from the end of the relevant assessment year was valid in the absence of any allegation in the recorded reasons that the assessee failed to disclose fully and truly all material facts necessary for the assessment.
Final Decision
The court allowed the petition and quashed the notice dated 30 March 2010 issued under Section 148 of the Income Tax Act, 1961.
Law Points
- Reopening of assessment beyond four years requires failure to disclose material facts
- Reasons recorded must contain allegation of failure to disclose
- Section 147 first proviso
- Section 148 notice
- Jurisdiction of Assessing Officer
Case Details
2011 LawText (BOM) (11) 72
Writ Petition No. 1765 of 2011
Dr. D.Y. Chandrachud, A.A. Sayed
Mr. S.E. Dastoor, Senior Advocate with Ms. Aarti Vissanji and Mr. S.J. Mehta for the Petitioner; Mr. Vimal Gupta for the Respondents
Dy. Commissioner of Income Tax, Circle 3(1) and Anr.
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Nature of Litigation
Writ petition under Article 226 of the Constitution of India challenging a notice under Section 148 of the Income Tax Act, 1961 for reopening assessment.
Remedy Sought
Quashing of the notice dated 30 March 2010 issued under Section 148 of the Income Tax Act, 1961.
Filing Reason
The notice was issued after four years from the end of the relevant assessment year without any allegation of failure to disclose material facts.
Previous Decisions
Assessment order was passed on 28 February 2006 after scrutiny.
Issues
Whether the notice under Section 148 issued after four years is valid without an allegation of failure to disclose material facts.
Submissions/Arguments
Petitioner: The reasons recorded for reopening do not contain any reference to failure to disclose fully and truly all material facts, hence the notice is invalid.
Respondent: The Assessing Officer was acting within jurisdiction to reopen the assessment after four years.
Ratio Decidendi
For reopening an assessment after four years from the end of the relevant assessment year, the first proviso to Section 147 requires that the income escaped assessment due to the failure of the assessee to disclose fully and truly all material facts. The reasons recorded must contain an allegation of such failure; otherwise, the Assessing Officer lacks jurisdiction to issue the notice under Section 148.
Judgment Excerpts
The reasons which have been disclosed for re-opening the assessment ex-facie do not contain any reference to a failure on the part of the Assessee to disclose fully and truly all material facts necessary for the assessment.
The first proviso to Section 147 stipulates that where an assessment under sub-section (3) of Section 143 or under Section 147 has been made for the relevant assessment year, no action shall be taken under that Section after the expiry of four years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.
Procedural History
The petitioner filed return for AY 2003-04 on 28 November 2003, revised returns on 11 January 2005 and 31 March 2005. Assessing Officer issued questionnaires and assessee replied. Assessment order passed on 28 February 2006. Notice under Section 148 issued on 30 March 2010. Petitioner filed writ petition challenging the notice.
Acts & Sections
- Income Tax Act, 1961: Section 147, Section 148, Section 10(23G)
- Constitution of India: Article 226
