2005 (8) TMI 79 - HC - Income Tax

Petitioners are challenging the for reopening of the assessment u/s 148 - reopening of the assessment on the ground that there is failure on the part of the assessee to disclose fully and truly all material facts cannot be sustained. Reopening on the basis of change of opinion is not permissible. Since the notices themselves are based on the material supplied by the petitioner at the time of initial assessment along with its returns of income it was not open for the Assessing Officer to reopen the assessment for the assessment years in question - notices in question are quashed and set aside holding them to be bad and illegal.

Summary

Issues:
Challenging notices for reopening of assessment for specific assessment years under section 148 of the Income-tax Act, 1961.

Analysis:
The petitioners, engaged in the manufacture of ball pens and refills, challenged notices dated March 30, 1989, for reopening assessments for the years 1975-76, 1976-77, and 1977-78. The notices were issued under section 148 of the Income-tax Act, 1961. The reasons for reopening the assessment for 1975-76 included non-disclosure of scrap and suppressed sales. The petitioners contended that all material particulars were disclosed in their returns, and the Assessing Officer had already inquired into the generation of scrap during the original assessment. The dispute regarding stainless steel balls consumption was also addressed, with the petitioners arguing that there was no failure to disclose material facts. The respondents defended the reopening, citing a failure to fully disclose correct factual material.

The statutory provisions of sections 147 and 149(1)(a)(ii) were considered. Section 147 allows for reassessment if there is a failure to disclose material facts. Section 149 outlines limitations on issuing notices for reassessment based on the elapsed time since the relevant assessment year. The Court found that the reasons for reopening the assessment were unsustainable. The issue of scrap generation during manufacturing was raised and accepted during the original assessment, and subsequent sales of scrap were accounted for. Similarly, the production of ball pens was found to be correctly recorded in the books of account. The Court held that reopening the assessment based on failure to disclose material facts was not justified. Reopening on the basis of a change of opinion was deemed impermissible. Since the notices were based on material provided during the initial assessment, the Assessing Officer had no grounds to reopen the assessments for the relevant years.

In conclusion, the Court quashed and set aside the notices, deeming them illegal and without merit. The Rule was made absolute with no order as to costs.