2011 (2) TMI 509 - HC - Income Tax

Issue of notice where income has escaped assessment - Depreciation in respect of the boilers - In the absence of any foundation having been laid in the reasons recorded to indicate any omission on the part of the petitioner in disclosing fully and truly all material facts the assumption of jurisdiction under section 147 of the Act by issuing notice under section 148 of the Act is without jurisdiction and as such the impugned notice cannot be sustained - The impugned notice dated 8-3-2001 issued under section 148 of the Act (Exhibit-M to the petition) is hereby quashed and set aside

Summary

Issues:
Challenge to notice under section 148 of the Income-tax Act, 1961 for reopening assessment for assessment year 1994-95.

Analysis:
1. The petitioner, a Public Limited Company, challenged a notice issued under section 148 of the Income-tax Act, 1961, reopening the assessment for the year 1994-95. The petitioner claimed 100% depreciation for boilers in the assessment year and provided necessary documents during the assessment proceedings. The Assessing Officer initially allowed the depreciation but later issued a notice stating an apparent mistake in allowing depreciation. Subsequently, another notice was issued to withdraw excess depreciation, leading to the current notice for reopening the assessment.

2. The petitioner argued that the notice issued in 2001, beyond four years from the relevant assessment year, required specific conditions to be met for invoking jurisdiction under section 147 of the Act. The petitioner contended that there was no failure to disclose material facts, which is a prerequisite for valid jurisdiction under section 147. The petitioner highlighted that the reasons recorded by the Assessing Officer did not establish any omission on their part.

3. The respondent opposed the petition, stating that the petitioner failed to fully disclose material facts regarding claiming 100% depreciation on boiler accessories and spare parts. The respondent argued that the petitioner did not provide sufficient evidence to prove the eligibility for 100% depreciation on accessories. Citing a Supreme Court decision, the respondent emphasized the duty of the assessee to disclose all primary facts necessary for assessment.

4. The court examined the statutory requirements for reopening an assessment under section 147. It noted that the Assessing Officer must satisfy that income has escaped assessment due to the assessee's failure to disclose material facts. The court scrutinized the reasons recorded by the Assessing Officer and found that there was no substantial evidence of failure to disclose material facts by the petitioner. The court emphasized that the reasons must clearly demonstrate the belief that income escaped assessment due to the assessee's failure.

5. Relying on a previous judgment, the court reiterated that the belief of income escapement due to the assessee's failure must be recorded in the reasons. Filing an affidavit later cannot introduce new material that was not part of the original belief formation. Since the reasons recorded lacked a foundation indicating the petitioner's failure to disclose material facts, the court concluded that the notice issued under section 148 was without jurisdiction and therefore quashed and set it aside.

6. The court allowed the petition, quashed the impugned notice dated 8-3-2001 issued under section 148 of the Act, and made the rule absolute with no order as to costs.