2012 (2) TMI 282 - HC - Income Tax

Validity of reopening of assessment beyond 4 years from the end of relevant A.Y A.Y. 04-05 sought to be reopened on the basis of an order of assessment for A.Y. 07-08 framed after scrutiny - Petitioner wholly owned subsidiary of a non resident shipping line retention of US 1.5 per day per container collected on behalf of the principal between 1993 to 2009 as administration charges in accordance with norms prescribed by RBI - offered the same as its own income during the period 1993 to 2009 for A.Y. 2010-11 Held that - Beyond a period of four years the test is not merely whether there has been an escapement of income but whether there has been a failure on the part of the Assessee to disclose fully and truly all material facts necessary for the assessment. Since there was a disclosure by the Petitioner of the material facts necessary for the assessment. Hence primary jurisdictional requirement under the proviso to Section 147 has not been fulfilled Decided in favor of assessee.

Summary

Issues:
Reopening of assessment beyond four years based on failure to disclose all necessary facts for Assessment Year 2004-05.

Analysis:
The Petitioner, a wholly owned subsidiary of a non-resident shipping line, entered an agency agreement in 1993 to render services and collect Container Detention Charges (CDCs). The Reserve Bank of India (RBI) issued a circular on CDC appropriation in 1993. The Petitioner disclosed discrepancies in the CDC allocation in its accounts for the years in question.

The Assessing Officer reopened the assessment for 2004-05 in 2011, citing failure to disclose fully and truly all necessary facts. The Petitioner argued full disclosure was made regarding the CDC allocation and subsequent audit notes. The Revenue contended the assessment reopening was based on findings from 2007-08 assessment.

The Court noted the reopening occurred beyond the four-year limit and analyzed the disclosure made by the Petitioner. The Court found no suppression of material facts by the Petitioner as CDC allocation discrepancies were disclosed. The assessment was reopened based on a subsequent year's order, but the primary jurisdictional requirement under Section 147 proviso was not met.

The Court also considered the Petitioner's disclosure for the subsequent year, where it offered the entire CDC amount. The Court concluded that since there was no failure to disclose necessary facts for 2004-05, the assessment reopening was unjustified. The Court set aside the notice dated 28 March 2011, ruling in favor of the Petitioner.

In conclusion, the Court found the reopening of the assessment beyond the four-year limit lacked justification due to the Petitioner's full disclosure of material facts. The Court emphasized the importance of meeting jurisdictional requirements for assessment reopening and ruled in favor of the Petitioner, setting aside the notice without costs.