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It is clear that the completion of assessment/re-assessment without furnishing the reasons recorded by the Assessing Officer for initiation of proceedings under section 147/148 of the Act is not sustainable in law as it is incumbent on the Assessing Officer to supply them within reasonable time as held by the Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd. v ITO (supra).
Undoubtedly an order of assessment which has been passed for a subsequent assessment year may furnish a foundation to reopen an assessment for an earlier assessment year. However, there must be some new facts which come to light in the course of assessment for the subsequent assessment year which emerge in the order of assessment.
When there was intensive examination in the first instance in respect of the issue, which was the basis for re-opening of assessment, it was necessary for the AO to indicate, what other material, or objective facts, constituted reasons to believe that the assessee had failed to disclose a material fact, necessitating reassessment proceedings.
Learned counsel for the petitioner in these circumstances submitted that the reasons to believe recorded by the Assessing Officer on 26.03.2009 do not record or state that the agreement between the petitioner and Quest was not on record, and that there was failure on the part of the assessee to fully and truly disclose the material facts.
It was held by the Third Member that section 147 applies both to section 143(1) as well as section 143(3) and, therefore, except to the extent that a reassessment notice issued u/s 148 in a case where the original assessment was made u/s 143(1) cannot be challenged on the ground of a mere change of opinion,
A plain reading of Section 281B of the Act clearly spells out that the Assessing Officer is empowered to pass order for provisional attachment to protect the interests of the revenue in certain cases during the pendency of any proceeding for the assessment of any income or for the assessment or reassessment of any income which has escaped assessment.
On going through the impugned Order of the High Court, we find that no reasons have been given by the High Court for setting aside the re-opening of assessment. In the circumstances, the impugned Order of the High Court dated 23rd December, 2011, in Writ Petition No. 1807 of 2011, is set aside and the matter is remitted to the High Court for de novo consideration in accordance with law.
Admittedly, the return was processed u/s 143(1), as per the assessment order, on 15.05.2002 and the notice u/s 148 was issued on 28.03.2008. Therefore, as per section 151, the Assessing Officer was required to obtain the sanction of Joint Commissioner of Income tax as four years had lapsed from the end of relevant assessment year.
In the present case, we find that not only is there a change of opinion but also the re-opening is barred by limitation inasmuch as the condition that the escapement of income must have resulted from the failure on the part of the petitioner to fully and truly disclose all material facts, has not been satisfied. The impugned order dated 27.10.2010 merely glosses over the objections raised by the petitioner with regard to limitation.
It is difficult to appreciate the petitioner’s objection that the information received from DAO-45, New Delhi, acting under Article 26 of the Indo-Japanese treaty for the Avoidance of Double Taxation, cannot constitute valid material on the basis of which the Assessing Officer can form even a tentative or prima facie belief that income to the extent of Rs. 11,28,644/- had escaped assessment.
