Case Note & Summary
The petitioner, Mangalore Refinery & Petrochemicals Limited, a public limited company engaged in running a petroleum refinery at Mangalore, filed a writ petition challenging an order dated 29th March 2004 passed by the Assistant Commissioner of Income Tax, Range 3(2), Mumbai, issuing a notice under Section 148 of the Income Tax Act, 1961 to reopen the assessment for the year 1998-99. The assessment had been completed earlier. The reason recorded for reopening was that on perusal of records, it was noticed that income tax interest of Rs.8,28,73,625/- debited to the Profit and Loss Account remained to be added back while arriving at book profit under Section 115JA of the Act. The Assessing Officer believed that income had escaped assessment to the extent of 30% of that amount, i.e., Rs.2,48,62,082/-. Since more than four years had lapsed from the end of the relevant assessment year, sanction of the Commissioner was obtained under the proviso to Section 151(1). The petitioner contended that the notice was invalid because there was no allegation that the petitioner had failed to disclose fully and truly all material facts necessary for assessment, which is a prerequisite for reopening beyond four years under the first proviso to Section 147. The respondents argued that the reopening was justified as the interest amount had escaped assessment. The court, after hearing both sides, held that the reasons recorded did not contain any allegation of failure to disclose material facts. The court noted that it was not a case of the petitioner not disclosing relevant information at the earlier occasion. Therefore, the reopening beyond four years was invalid. The court quashed the notice under Section 148 and allowed the writ petition with no order as to costs.
Headnote
A) Income Tax - Reopening of Assessment - Section 148, Income Tax Act, 1961 - Reopening beyond four years - The assessee, a public limited company, challenged a notice under Section 148 issued after four years from the end of the assessment year 1998-99. The notice was based on the ground that interest of Rs.8,28,73,625/- remained to be added back while computing book profit under Section 115JA. However, the reasons recorded did not allege that the assessee had failed to disclose fully and truly all material facts. Held that in the absence of such an allegation, the reopening beyond four years is invalid and the notice is liable to be quashed (Paras 3-5).
Issue of Consideration
Whether a notice under Section 148 of the Income Tax Act, 1961 issued beyond four years from the end of the relevant assessment year is valid when there is no allegation that the assessee failed to disclose fully and truly all material facts necessary for assessment.
Final Decision
The court allowed the writ petition and quashed the notice under Section 148 of the Income Tax Act, 1961 dated 29th March 2004. No order as to costs.
Law Points
- Reopening of assessment beyond four years requires failure to disclose material facts
- Section 148 notice without such allegation is invalid
- Section 115JA book profit computation
- Interest on income tax not deductible in book profit
