Reopening u/s 148 alleging evidence discovered with due diligence quashed. SC dismisses SLP of Deptt.

Reopening u/s 148 alleging evidence discovered with due diligence quashed as no specific failure on part of the assessee was stated. SC dismisses SLP of the Department

ABCAUS Case Law Citation:
ABCAUS 3110 (2019) (08) SC

The respondent assessee was a company. For the relevant assessment year it had filed the original return of income. Thereafter, survey proceedings under section 133 (A) of the Income Tax Act, 1961 (the Act) were carried out at the business premises of the petitioner during the course of which the petitioner surrendered income to buy peace of mind.

The petitioner filed revised return of income including surrendered income which was processed under section 143 (1) of the Act. Subsequently, the case was selected for scrutiny, which culminated into an assessment order under section 143 (3) of the Act.

Thereafter, by the issue of notice u/s 148 of the Act, the assessment of the petitioner for the year under consideration was sought to be reopened. Upon receipt of the notice, the petitioner requested the respondent to furnish the reasons recorded for initiating re-assessment proceedings.

Upon such reasons being furnished to the assessee raised detailed objections which were rejected by the AO.

Being aggrieved, the assessee filed a petition before the Hon’ble High Court under Article 226 of the Constitution of India challenging the notice issued under section 148 of the Act.

Before the Hon’ble High Court, the assessee submitted that the impugned notice had been issued beyond a period of four years from the end of the relevant assessment year, therefore, in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts, necessary for its assessment, the assumption of jurisdiction on the part of the Assessing Officer under section 147 of the Act was without authority of law.

The attention of the court was invited to a judgment passed by the court in the assessee’s own case wherein the assessment was sought to be reopened on similar grounds. It was submitted that the above decision was squarely applicable to the facts of the present case, and, hence, the petition deserved to be allowed by setting aside the impugned notice.

The Hon’ble High Court observed that a perusal of the reasons recorded revealed that the Assessing Officer had not been able to pin-point any specific failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the year under consideration.

The Hon’ble High Court noted that the AO had merely made a general statement that though the assessee has filed a copy of annual report and audited profit and loss account and balance-sheet along with return of income, where various information/material were disclosed, the requisite material facts for reopening the assessment were embodied in such a manner that the material evidence could not be discovered by the Assessing Officer and could be discovered with due diligence attracting the explanation to the provisions of section 147 of the Act.

However, the Hon’ble High Court noted that from the reasons recorded, it was evident that no fresh material had been found by the Assessing Officer on the basis of which the assessment was sought to be reopened, and that upon verification of the very record that the assessee had produced during the course of scrutiny assessment, the assessment was sought to be reopened.

The Hon’ble High Court observed that nothing specific had been pointed out by the Revenue to show as to what was the failure on the part of the petitioner to disclose fully and truly all materials facts.

It was held that in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment, the first proviso to section 147 of the Act would be attracted and consequently, the assumption of jurisdiction on the part of the Assessing Officer under section 147 of the Act by issuing the impugned notice under section 148 of the Act was without authority of law. The impugned notice under section 148 of the Act, therefore, could not be sustained.

Accordingly, the Hon’ble High Court quashed and set aside the impugned notice issued u/s 148 of the Act.

Aggrieved by the quashing of the said notice, the Department challenged the order of the Hon’ble High Court before the Hon’ble Supreme Court by way of filing a Special Leave Petition (SLP).

However, the Hon’ble Supreme Court dismissed the SLP.

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