Case Note & Summary
The petitioner, DIL Ltd., challenged a notice dated 8 March 2011 issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for Assessment Year 2004-05. The original assessment under Section 143(3) was completed on 30 August 2006, computing total income at Rs.7.62 lakhs and book profit under Section 115JB at Rs.1.21 crores. The reopening was beyond four years from the end of the relevant assessment year. The reasons furnished to the assessee indicated that certain provisions (diminution in value of investment, gratuity, superannuation, and capital expenditure) were not added to book profit, leading to escapement of income of Rs.1,80,30,110. However, the reasons did not state that the assessee had failed to disclose fully and truly all material facts. The assessee contended that the proviso to Section 147 requires such an allegation for reopening beyond four years, and its absence renders the notice invalid. The court agreed, holding that the basic requirement of the proviso was not fulfilled, and therefore the notice under Section 148 was without jurisdiction. The petition was allowed, and the notice was quashed.
Headnote
A) Income Tax - Reassessment - Section 147, 148, Income Tax Act, 1961 - Reopening beyond four years - The proviso to Section 147 requires that for reopening an assessment after four years from the end of the relevant assessment year, the Assessing Officer must have reason to believe that income has escaped assessment due to the failure of the assessee to disclose fully and truly all material facts. In the present case, the reasons recorded for reopening did not contain any allegation of such failure. Consequently, the notice under Section 148 was held to be without jurisdiction and was quashed. (Paras 2-3)
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 reasons recorded do not allege that the assessee failed to disclose fully and truly all material facts necessary for the assessment.
Final Decision
The petition is allowed. The notice dated 8 March 2011 under Section 148 of the Income Tax Act, 1961 is quashed.
Law Points
- Reopening beyond four years requires failure to disclose fully and truly all material facts
- Proviso to Section 147
- Section 148
- Income Tax Act 1961
Case Details
2012 LawText (BOM) (01) 69
WRIT PETITION (L) NO.2786 OF 2011
Dr. D.Y. Chandrachud, M.S. Sanklecha
Mr. Percy J. Pardiwala, Mr. Pankaj Toprani for the Petitioner; Ms. Suchitra Kamble for the Respondents
Asst. Commissioner of Income Tax, Circle 6(2) & Ors.
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Writ petition challenging notice under Section 148 of Income Tax Act for reopening assessment beyond four years.
Remedy Sought
Quashing of notice dated 8 March 2011 issued under Section 148 of the Income Tax Act, 1961.
Filing Reason
The notice for reopening assessment for AY 2004-05 was issued beyond four years without alleging failure to disclose fully and truly all material facts.
Previous Decisions
Assessment under Section 143(3) was completed on 30 August 2006.
Issues
Whether the notice under Section 148 for reopening assessment beyond four years is valid when the reasons recorded do not allege failure to disclose fully and truly all material facts.
Submissions/Arguments
The assessee submitted that the reasons supplied do not contain any statement that the assessee failed to disclose fully and truly all material facts, thus the basic requirement of the proviso to Section 147 is not fulfilled.
Ratio Decidendi
For reopening an assessment beyond four years from the end of the relevant assessment year, the proviso to Section 147 requires that the Assessing Officer must have reason to believe that income has escaped assessment due to the failure of the assessee to disclose fully and truly all material facts. In the absence of such an allegation in the reasons recorded, the notice under Section 148 is without jurisdiction.
Judgment Excerpts
The reasons which have been furnished to the assessee for reopening the assessment are as follows : ... I, therefore, have reason to believe that income (Book profit) chargeable to tax to the extent of Rs. 1,80,30,110/ has escaped assessment.
Counsel appearing on behalf of the Assessee submitted that (i) Ex facie the reasons which have been supplied to the assessee do not contain any statement to the effect that the assessee has failed to disclose fully and truly all material facts necessary for the assessment. Hence, the basic requirement in the proviso to Section 147 for reopening the assessment beyond the period of four years has not been fulfilled.
Procedural History
The original assessment under Section 143(3) was completed on 30 August 2006. On 8 March 2011, a notice under Section 148 was issued to reopen the assessment for AY 2004-05. The assessee filed a writ petition challenging the notice.
Acts & Sections
- Income Tax Act, 1961: Section 147, Section 148, Section 143(3), Section 115JB
