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It will be relevant to record that the primary objection noticed by the assessing authority while serving notice upon the assessee as provided U/s 148 of the Act, 1961 was in regard to dis-allowance of salary of Rs.1,50,000/- to the Managing Director of the assessee company on 30th March, 2002 in cash and Rs.5 Lacs towards advance salary for the assessment year 2002-03 in cash on 10.04.2002 and since it was payment of salary in cash exceeding Rs.20,000/-, the above expenses were dis-allowable as provided U/s 40A(3) of the Act, 1961.
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.
At time when query was raised under the head ‘Selling & Distribution Expenditure’, had there been insistence that TDS was required to be deducted and the amount specified to the tune of Rs. 22,70,869 was not required to be allowed as Trade Incentive without deducting TDS, the same ought to have been reflected somewhere in the computation of income and that would have bearing on the computation itself.
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.
From such exchange of information between the Assessing Officer and the assessee, we need to gather whether the question of taxability of a receipt of Rs. 5,56,000/- from the members by the petitioner was under consideration by the Assessing Officer.
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,
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.
