Case Note & Summary
The petitioner, Shriram Foundry Ltd., challenged a notice dated 10 February 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 October 2006. The reason supplied for reopening was that the melting loss claimed by the assessee (7.24%) was higher than the normal allowable melting loss of 5.5% as per an ITAT ruling in the case of Saroj Castings Pvt. Ltd. The petitioner objected, stating that the melting loss was based on audited accounts and had been verified during the original assessment. The Assessing Officer rejected the objections, observing that on verification of records, the melting loss was found on the higher side. The petitioner argued that the reopening was beyond four years from the end of the relevant assessment year and there was no allegation of failure to disclose material facts, making it a mere change of opinion. The Revenue contended that there was no discussion in the original assessment order regarding melting loss, implying income had escaped assessment. The court held that since the reopening was beyond four years, the proviso to Section 147 requires that income escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts. The reasons disclosed did not contain any such allegation. The court further held that the reasons indicated a change of opinion, as the original assessment had already considered the claim. Consequently, the notice under Section 148 was quashed and the writ petition was allowed.
Headnote
A) Income Tax - Reassessment - Section 147, 148 Income Tax Act, 1961 - Reopening beyond four years - The Assessing Officer sought to reopen assessment for AY 2004-05 by notice under Section 148 dated 10 February 2011, beyond four years from the end of the assessment year. The reasons disclosed did not allege any failure on the part of the assessee to disclose fully and truly all material facts. The court held that in the absence of such allegation, the reopening is not permissible and amounts to a change of opinion. (Paras 3-6) B) Income Tax - Change of Opinion - Section 147 Income Tax Act, 1961 - The reasons for reopening stated that the melting loss claimed was higher than that found in similar line of business and as per ITAT ruling. The court held that this was merely a change of opinion on the part of the Assessing Officer, as the original assessment under Section 143(3) had already verified the accounts and allowed the claim. (Paras 4-6)
Issue of Consideration
Whether the reopening of assessment beyond four years from the end of the relevant assessment year is valid when there is no allegation of failure to disclose fully and truly all material facts necessary for assessment.
Final Decision
Writ petition allowed. Notice dated 10 February 2011 under Section 148 and order dated 9 December 2011 rejecting objections are quashed and set aside.
Law Points
- Reopening beyond four years requires failure to disclose material facts
- Change of opinion not permissible
- Section 147 and 148 Income Tax Act
- 1961
