2011 (4) TMI 1166 - HC - Income Tax

Reopening of assessment - beyond a period of 4 years from the end of relevant AY - as per AO expenditure allowed as a revenue expenditure could have been allowed as capital expenditure Held that - On a plain reading of the reasons recorded it is apparent that there is not even whisper as regards any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment. All that is stated is that the expenditure which has been allowed as a revenue expenditure could have been allowed as capital expenditure in the light of the decision of CIT v. Coal Shipments P. Ltd. 1971 (10) TMI 6 - SUPREME Court and Gujarat Mineral Development Corporation Ltd. v. CIT 1982 (8) TMI 35 - GUJARAT High Court As in the reasons recorded it is stated that due to mistake income had been underassessed. This mistake apparently is the mistake on the part of the AO who framed the original assessment in allowing the expenditure which according to the successor-AO could have been held to be capital expenditure. Thus the basic requirement in invoking the provisions of section 147 is clearly not satisfied in this case - Decided in favor of assessee

Summary

Issues:
1. Validity of notice issued under section 148 of the Income-tax Act, 1961 for reopening assessment year 1996-97.

Analysis:
1. The petitioner challenged the notice dated March 21, 2002, issued by the respondent under section 148 of the Income-tax Act, 1961, reopening the assessment for the assessment year 1996-97. The petitioner contended that since the notice was issued beyond four years from the end of the relevant assessment year, the conditions of the proviso to section 147 of the Act must be fulfilled for valid jurisdiction under section 147. The petitioner argued that there was no failure on their part to disclose all material facts, rendering the reopening of the assessment without jurisdiction.

2. The respondent, on the other hand, justified the issuance of the notice under section 148, stating that income chargeable to tax had escaped assessment. The court noted that for valid jurisdiction under section 147 after four years from the relevant assessment year, the Assessing Officer must establish that income has escaped assessment due to the petitioner's failure to disclose all material facts necessary for assessment. In this case, the court found that the reasons recorded for reopening the assessment did not indicate any failure on the part of the petitioner to disclose all material facts.

3. The court examined the reasons recorded by the Assessing Officer for reopening the assessment, which highlighted an alleged mistake in assessing certain expenditures. However, the court observed that the reasons did not establish any failure on the part of the petitioner to disclose material facts. The court concluded that the Assessing Officer lacked valid jurisdiction under section 147 of the Act to issue the impugned notice dated March 21, 2002. Consequently, the court quashed and set aside the notice, ruling in favor of the petitioner.

4. The court's decision was based on the lack of evidence showing the petitioner's failure to disclose material facts, which is a prerequisite for invoking section 147 of the Act after four years from the relevant assessment year. The court emphasized the importance of fulfilling the conditions specified in the proviso to section 147 for assuming valid jurisdiction. As a result, the court allowed the petition, quashed the notice, and made no order as to costs.