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2004 Supreme(P&H) 1218
PUNJAB & HARYANA HIGH COURT
N.K.Sud and Hemant Gupta JJ.
Winsome Textiles Industries Ltd.
Versus
Union Of India
Civil Writ Petition No. 3444 of 2004,
Decided On : NOVEMBER 2, 2004
Initiation of proceedings under Section 147 after the expiry of four years from the end of the assessment year is without jurisdiction if there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment.
Headnote:
Income-tax Act - Validity of notice under Section 148 - Section 147 - Section 143(1)(a) - Section 154 - Section 158BD - Section 115JA - Section 80-IA - Section 80A(2) - Section 80-IA(2)(iv)(b) - Section 80-IA(7) - Section 28 - Section 80HH - Section 80-IA(10) - Section 80-IA(1)(a) - Section 143(3) - Section 151 - Section 147 - Section 143(3) - Section 143(1)(a) - Section 154 - Section 158BD - Section 115JA - Section 80-IA - Section 80A(2) - Section 80-IA(2)(iv)(b) - Section 80-IA(7) - Section 28 - Section 80HH - Section 80-IA(10) - Section 80-IA(1)(a) - Section 143(3) - Section 151 - Section 147
Fact of the Case:
The assessee filed its return of income for the assessment year 1997-98, resulting in a loss. Various additions/disallowances were made to the profit as per profit and loss account, and the income was determined at Rs. 2,59,86,033. The Assessing Officer issued a notice under Section 148 of the Act, alleging that income chargeable to tax had escaped assessment. The assessee challenged the validity of the notice, contending that the proceedings were initiated on a mere change of opinion and that all material facts necessary for assessment had been disclosed.
Finding of the Court:
The court found that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year 1997-98. Therefore, the initiation of proceedings under Section 147 after the expiry of four years from the end of the assessment year was held to be without jurisdiction.
Issues: Validity of notice under Section 148, Jurisdiction of Assessing Officer, Failure to disclose material facts
Ratio Decidendi: The court held that the initiation of proceedings under Section 147 after the expiry of four years from the end of the assessment year is without jurisdiction if there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment.
Final Decision: The court allowed the writ petition and quashed the impugned notice under Section 148 dated September 19, 2003.
N.K.Sud, J.
1. Challenge in this writ petition is to the validity of notice dated September 19, 2003 (annexure P-7A), under Section 148 of the Income-tax Act, 1961 (for short "the Act"), by which proceedings under Section 147 of the Act have been initiated to reassess the income for the assessment year 1997-98 which is alleged to have escaped assessment.
2. The assessee-company filed its return of income for the assessment year 1997-98 on November 21, 1997. The computation of income under the Act resulted in loss of Rs. 1,15,89,039. However, computation of income under Section 115JA was made as under :
466-MK.1a.htm
3. Accordingly, the assessee declared income of Rs. 5,74,955 in its return. The return was processed under Section 143(1)(a) on January 29, 1998, wherein an addition of Rs. 1,000 was made. The intimation under Section 143(1)(a) was subsequently modified vide order under Section 154 of the Act dated September 15, 1999, making additions of Rs. 6,50,000 and Rs. 2,27,802 whereby loss computed in the computation of income at Rs. 1,15,89,039 stood reduced to Rs. 1,07,11,237. Thereafter, regular assessment under Section 143(3) was framed on January 18, 2000, wherein various additions/disallowances were made to the profit as per profit and loss account and the income was determined at Rs. 2,59,86,033. Against this income, set-off for unabsorbed depreciation for the assessment year 1996-97 was allowed at Rs. 99,70,510 and the net taxable income was determined at Rs. 1,60,15,523. As a result of the appellate order in the assessment year 1996-97, the unabsorbed depreciation stood enhanced to Rs. 1,72,55,633. Accordingly, assessment order for the assessment year 1997-98 was rectified vide order dated June 28, 2000, and the deduction for unabsorbed depreciation was enhanced from Rs. 99,70,510 to Rs. 1,72,55,638 and the net taxable income stood reduced to Rs. 87,32,400. The assessee had also preferred an appeal before the Commissioner of Income-tax (Appeals) who deleted all the additions except one addition of Rs. 35,000. Thus, the income determined after the appeal effect worked out to a loss of Rs. 1,06,06,159 which pertained to depreciation.
4. The assessee had also received a notice under Section 158BD of the Act for the block period April 1, 1989, to September 2, 1998, as certain documents relating to it had been seized in a search conducted by the Director of Income-tax (Investigation), Calcutta, and Chandigarh, at the residential and business premises of Bagrodia group on September 2, 1998. The documents were fully verified and the block assessment was framed under Section 158BD on September 25, 2000, accepting the return of the assessee.
5. On September 19, 2003, the Assessing Officer issued the impugned notice under Section 148 of the Act observing that the income chargeable to tax for the assessment year 1997-98 had escaped assessment within the meaning of Section 147 of the Act. The assessee was, therefore, required to furnish a return of income within 30 days from the service of that notice. The assessee complied with the said notice and filed the return on October 13, 2003 and also requested that a copy of the reasons recorded for initiation of proceedings under Section 147 of the Act be supplied to it so that it may file objections against the same. The Assessing Officer duly supplied the reasons, which read as under :
"Reasons for issuance of notice under Section 148 WINSOME TEXTILES INDUSTRIES LTD.
Assessment year 1997-98
1. The assessee filed return of income on 21st November, 1997, declaring loss of Rs. (-) 1,15,89,039. The assessee did not avail of deduction in the normal computation of income under Chapter VI-A, i.e., deduction under Section 80-IA as gross total income was loss (-) Rs. 1,15,89,039. However, the assessee declared income at Rs. 5,74,955 under Section 115JA, after availing of deduction under Section 80-IA of Rs. 5,71,25,919.
2. The assessment was framed under Section 143(3) vide order da
