Supreme Court uphold quashing of reassessment notice issued beyond four years without failure of assessee to disclose fully & truly all material facts
In a recent order, the Hon’ble Supreme Court has upheld the order of the High Court in quashing the reassessment notice issued beyond the period of four years without failure on the part of the of assessee to disclose fully & truly all material facts.
ABCAUS Case Law Citation
ABCAUS 3582 (2022) (02) SC
The present SLP was filed by the Revenue against the impugned order of the High Court quashing the notice for reopening issued by the Assessing Officer (AO) under section 148 of the Income Tax Act, 1961 (the Act).
The respondent assessee assessee was a Private Limited Company. Initially the return of the assessee was processed under Section 143(1) of the Act and thereafter, the case was selected for scrutiny assessment.
During scrutiny proceedings, the AO asked the details regarding unsecured loan taken by the assessee during the year under consideration which were duly furnished by the assessee.
The AO based upon the information received from the investigating wing regarding accommodation entry received by the assessee, reopened the assessment under Section 147 of the Act by issuing notice under Section 148 of the Act. Pursuant to the notice, the assessee filed return of income and requested to supply the reasons recorded for reopening.
On receiving the reasons recorded, the assessee raised an objection to the reopening stating that notice was issued beyond the period of four years from the end of relevant year and as such, in absence of any failure on the part of the assessee to disclose fully and truly all material facts, the assumption of jurisdiction by the Assessing Officer under Section 147 was invalid.
However, the objections raised were rejected by the AO.
The assessee filed a Writ Petition before the Hon’ble High Court and inter alia contended that during the course of scrutiny assessment, the Assessing Officer had gone into the issue and did not make any addition with respect to unsecured loan and interest thereon. Hence, the action on the part of the revenue to reopen the assessment was nothing but a change of opinion which cannot be permitted in eyes of law.
It was also argued that the notice u/s 148 can be issued if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment, for which, the Assessing Officer, at all applied his mind independently so as to reach a conclusion that income has escaped assessment. But in the present case, the Assessing Officer initiated the proceedings of reopening merely based on borrowed satisfaction i.e. the information received from the Investigation Wing.
The Hon’ble High Court observed that the assessee had disclosed fully and truly material facts, with respect to loan transaction as well the interest paid on the loan and TDS deducted. The Assessing Officer at the time of scrutiny assessment, accepted the transaction.
The High Court opined that under the circumstances, it could not be said that the assessee had withheld the primary material and failed to disclose truly and fully all material facts of the assessment.
The Hon’ble High Court opined that in the present case, the conditions precedent for exercise of power under Section 147 after expiry of period of 4 years of relevant assessment year were not satisfied,
As a result, the High Court held that assumption of jurisdiction on the part of the Assessing Officer beyond a period of four years was invalid and without jurisdiction and the notice issued u/s 148 was quashed and set aside.
The Revenue, aggrieved by the order of the High Court filed a Petition for Special Leave to Appeal before the Hon’ble Supreme Court.
The Hon’ble Supreme Court observed that at the time of Scrutiny Assessment under Section 143(3), the Assessing Officer had asked for the details regarding the unsecured loan taken by the Assessee during the year under consideration and the Assessee had furnished the details as asked for and thereafter, after perusing the details so furnished by the Assessee, the Assessing Officer had passed the order under Section 143(3) of the Act.
The Hon’ble Supreme Court stated that in view of the above, it could not be said that there was any suppression on the part of the assessee in not disclosing true and correct facts.
Accordingly, the Hon’ble Supreme Court held that the High Court was justified in quashing the re-assessment proceedings and the notice under Section 148 of the Act.
A a result the SLP filed by the Department was dismissed.
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