The Bombay High Court allowed a writ petition challenging the action of respondent No.1 seeking to reopen the completed assessment of the petitioner for the Assessment Year 1992-1993. The Court observed that where the notice has been issued after the expiry of four years from the end of the relevant assessment year, the onus is on the Assessing Officer to show that income chargeable to tax has escaped assessment.
Brief Facts:
Petitioner had, on 1st January 1993, filed its return of income for the Assessment Year 1992-1993. During the course of assessment proceedings, respondent No. 1 called for voluminous and comprehensive details and raised queries on various issues. All requisitions and queries of respondent no.1 were fully complied with and answered by the petitioner. The assessment was completed on 8th September 1995. This assessment order was challenged by the petitioner by filing an appeal before the Commissioner of Income Tax. Respondent No. 2 passed an order on revising the assessment order of respondent No. 1.
This order was challenged by the petitioner by filing an appeal before the Income Tax Appellate Tribunal. Respondent No. 1 gave effect to the revisionary order of CIT by applying the tax rate of 65%. Against this order, an appeal was filed by the petitioner. While these three appeals were pending, the Finance Act introduced the Kar Vivad Samadhan Scheme, 1998. The petitioner, as per the requirements of the KVSS, filed a declaration. Subsequently, the pending appeals were withdrawn and dismissed.
On 15th January 2000, the petitioner received a notice from respondent no.1 alleging that the petitioner’s income for Assessment Year 1992-1993 had escaped assessment and requiring the petitioner to file a return of its income for the said Assessment Year within 30 days. Petitioner challenged the validity of the notice and called upon respondent no.1 to furnish the reasons to believe recorded prior to issuance of the notice. Respondent no.1 refused to provide the same and hence, the petitioner has approached this Court.
Contentions of the Petitioner:
The Learned Counsel for the Petitioner pointed out that once the assessment for the entire year was settled by following the provisions of the KVSS, there was no question of reopening any issue which was the subject matter of the order of the Designated Authority. The Learned Counsel argued that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It would, therefore, follow that the reopening of the assessment for the same subject matter is merely on the basis of change of opinion of the Assessing Officer and this change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment.
Contentions of the Respondent:
The Learned Counsel for the Respondent submitted that having filed a declaration under the KVSS, does not mean that there has to be a closure.
Observations of the Court:
The Court noted that the issue of PMS relating to Grasim Industries Ltd. had been raised by the Assessing Officer during the assessment proceedings, and a detailed reply was furnished and the matter was dealt with in detail in the assessment order. Therefore, this reopening of assessment is merely on the basis of change of opinion of the Assessing Officer, and that does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment.
The Court observed that the notice of reopening has been issued after the expiry of four years from the end of the relevant assessment year. Under Section 148 of the Act, where the notice has been issued after the expiry of four years from the end of the relevant assessment year, the onus is on the Assessing Officer to show that income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for that assessment year.
The decision of the Court:
The Bombay High Court, allowing the petition, held that there was no failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment.
Case Title: Citibank N.A. vs S.K. Ojha & Ors.
Coram: Hon’ble Justice K. R. Shriram and Hon’ble Justice M.M. Sathaye
Case no.: WRIT PETITION NO.2189 OF 2000
Advocate for the Petitioner: Mr. Percy Pardiwalla
Advocate for the Respondents: Mr. Suresh Kumar
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