9911796707
TMI Blog2020 (2) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 143 (3) of the Income Tax Act, 1961, and in absence of specific allegation by the Assessing Officer against the assessee about the failure on the part of the assessee in disclosing fully and truly any material fact necessary for assessment as appears from the recorded reason for reopening of assessment under Section 147 of the Income Tax Act, 1961. Facts in brief on perusal of relevant records available emerge hereunder. According to the petitioner it is a member's club and is registered as a company limited under the provisions of Section 25 of the Companies Act, 1956 and its objects are to provide its members all the useful privileges, advantages, conveniences and accommodation of a club and it is the case of the petitioner that no person other than a member or a guest accompanied by the member or his wife can use the facilities of the club and no outsider is permitted to use such facilities of the club. Each member of the club is a member of the company and each of the company is a member of the club and there is complete identity between the members of the club and the members of the company. It is the case of the petitioner that a member's club (not a propriet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opened under Section 147 of the Income Tax Act, 1961. Recorded reasons for reopening of assessment in respect of both the relevant assessment years are almost the same and one of which is hereunder: "In the instant case I.T. Return was originally submitted on 24.10.2007. Subsequently, the assessee company filed a revised return on 07.07.2008 showing total income at Rs. 10,11,926/-. The return was duly processed u/s. 143 (1). Thereafter, order u/s. 143 (3) for A.Y. 2007-08 was passed in this case on 13.12.2009 assessing total income at Rs. 10,11,928/-. In the meantime the Hon'ble Supreme Court of India has opined in its order in Civil No. 124 of 2007 (M/s. Bangalore Club vs. Commissioner of Income Tax), dated 14 January 2013 that income earned by way of interest from corporate members of a Club is taxable income and does not come under the ambit of the mutuality principle and therefore income tax should be paid. In the instant case, scrutiny assessment for the assessment year 2007-08 was completed u/s. 143 (3) of the Act on 03.12.2009. From the record it is seen that the assessee has filed a submission dated 25.11.2009 where by the assessee has disclosed interest income o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not that the information of the alleged escaped income in question came to knowledge of the Assessing Officer for the first time subsequent to the assessment passed under Section 143 (3) of the Act. (iii) Nowhere in the recorded reason the Assessing Officer has specifically stated that there was any omission or failure on the part of the assessee in disclosing fully and truly the material facts necessary for assessment under Section 143 (3) of the Act. (iv) At the time of passing the assessment order under Section 143 (3) of the Income Tax Act, 1961 it was settled legal position by various judicial precedents that income in question of the petitioner was not liable to be taxed. Learned Counsel appearing for the petitioner challenging the initiation of impugned proceedings under Section 147 and notices under Section 148 of the Income Tax Act, 1961, contends hereunder. Admittedly the notices under Section 148 of the Act for both the assessment years were issued after the expiry of four years from the end of the relevant assessment year and there is no specific allegation in the reasons recorded reason that there was any failure on the part of the petitioner to disclose f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer (2011) 336 ITR 413 (AP) are misplaced. All the three decisions of the Hon'ble Supreme Court relate to reopening of assessment within a period of four years on the basis of information, being a decision which came to the notice of the Assessing Officer subsequent to the assessment. The decision of the Hon'ble Andhra Pradesh High Court has also been relied upon for the same proposition. He submitted that the said principle will not apply where the assessment is sought to be reopened after the expiry of four years from the end of the relevant assessment year on the basis of a subsequent judgment of the Hon'ble Supreme Court reversing the legal position and in such case the Assessing Officer will have to establish failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. No such allegation can be made where the original assessment is made upon due consideration of the facts and the law on the issues he wants to reopen the assessment by simply on the ground that there is subsequent reversal of the legal position by the Court. That is why the Hon'ble Supreme Court in Simplex Concrete's case (supra) held that the reassessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quent to the assessment. There is no material that the second requirement of failure on the part of the petitioner to disclose fully and truly any material fact, has even been alleged. Learned counsel for the respondents relied on the law as decided by the apex court in the case of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 for showing that this court, at this stage of issuance of notice, is not to assess the correctness or sufficiency of materials. But this contention cannot be accepted as at this stage not the correctness or sufficiency of the materials but the very existence of the allegation is being considered and that is within the power of the court when the notice is challenged." ".............. But in the present case the respondents have failed to show that the second condition was satisfied at all. Therefore, in such circumstances, I am of the opinion that in the absence of satisfaction of one of the statutory requirements as contained in Section 147, the notices impugned under Section 148 cannot be held to be valid as they were issued after the expiry of four years from the last date of the concerned assessment year and there was an assessment under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer must be able to justify the same based on material record. The Division Bench observed as follows: "He must disclose in the reason as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence." We find in the circumstances that the impugned notice is not sustainable and is liable to be quashed and set aside. Accordingly, the writ petition is allowed in terms of prayer clauses (a) and (c)." Relevant portion of the judgment in the case of Simplex Concrete Piles (India) Ltd. -vs- Deputy Commissioner of Income Tax & Ors reported in (2013) 358 ITR 129 (SC) which quoted hereunder. "We see no error in the observation made by the Division Bench of the High Court in the impugned period of four years provided under Section 147/149 (1A) of the Income Tax Act, 1961, (for short, "the Act") expires then the question of reopening by the Department does not arise. In any event, at the relevant time, when the assessment order got completed, the law as declared by the jurisdictional High Court, was that the civil construction work carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of the Hon'ble Supreme Court reversing the legal position existing at the time of passing of the assessment order can be called an omission or failure on the part of the assessee to disclose fully and truly the material fact necessary for the relevant assessment and particularly in a case where four years have expired from the end of the relevant assessment year. Learned Counsel for the revenue simply defended and justified initiation of reassessment proceeding under Section 147 of the Act and issuance of the impugned notices under Section 148 of the Act by reiterating the recorded reasons for reopening of the assessment by the Assessing Officer. Before coming to the conclusion on the legal issues involved in the Writ Petition I would like to discuss the following provisions of law which are relevant for adjudication for the same: Section 149 (1) (b) of the I.T. Act 1961 prescribes the time limit for issue of notice. This section states that no notice under section 148 shall be issued for the relevant assessment year - (a) If four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) [or clause (c)]. (b) Clause (b) stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw and the decisions relied upon by the parties, in my considered view the impugned notices under Section 148 of the Income Tax Act, 1961 and the proceedings under Section 147 of the Act are not sustainable in law and should be quashed for the reason that admittedly impugned proceeding initiated under Section 147 and notices issued under Section 148 of the Income Tax Act, 1961, which were issued after the expiry of four years from the end of the relevant assessment year and in view of the fact that there is no whispering in the recorded reason that there was any omission or failure on the part of the assessee in disclosing fully and truly material facts for assessment and in view of the fact that the Assessing Officer could not establish that the information of alleged escaped income was not within his knowledge and was not considered at the time of passing of the assessment order under Section 143 (3) of the Income Tax Act, 1961 and it came to his knowledge subsequent to the assessment order passed under Section 143 (3) of the Income Tax Act, 1961 and that subsequent decision of the Hon'ble Supreme Court reversing the legal position prevailing at the time of regular assessment can ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
