Validity of reassessment has to be decided with reference to reasons recorded while re-opening an assessment

CASE LAWS DETAILS

DECIDED BY: HIGH COURT OF BOMBAY,

IN THE CASE OF : Purity Tech Textile Pvt. Ltd. Vs ACIT, Appeal No: W. P. No. 268 & 269 of 2010, DECIDED ON: February 8, 2010

RELEVANT PARAGRAPH

12. Section 147 provides that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 163 assess or re ­assess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the Section. Under the first proviso, where an assessment has been made under Section (3) of Section 143 or Section 147 for the relevant assessment year, no action can be initiated under Section 147 after the expiry of four years from the end of the relevant assessment year unless the income chargeable to tax has escaped assessment by reason of the failure of the assessee inter alia to disclose fully and truly all material facts necessary for his assessment, for that assessment year. The jurisdictional condition under Section 147 is the formation of belief by the Assessing Officer that income chargeable to tax has escaped assessment for any assessment year. The reasons which are recorded by the Assessing Officer are crucial and it is on the basis of those reasons alone that the validity of the order reopening an assessment has to be decided. Where an assessment has been made under Section 143(3), action can be initiated after the expiry of four years from the end of the relevant assessment year if the income chargeable to tax has escaped assessment because of the failure of the assessee to make fully and truly a disclosure of the material facts. The provisions of Section 147 have been interpreted in a recent judgement of the Supreme Court in Commissioner of Income Tax V/s. Kelvinator of India Limited.1 The Supreme Court noted that after 1st April 1989 the power to reopen is much wider than earlier since the substantive part of Section 147 only imposes one condition namely that the Assessing Officer must have reason to believe that income has escaped assessment. The Supreme Court held that nonetheless, a mere change of opinion would not justify the exercise of the power to re ­open an assessment and there must be tangible material before the Assessing Officer to come to the conclusion that income has escaped assessment. The Supreme Court held thus :

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