DIL LTD Vs. ASST. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) RULE with the consent of Counsel for the parties returnable forthwith. With the consent of Counsel and at their request the Petition is taken up for hearing and final disposal.

(2.) THE Petitioner has challenged a notice dated 8 March 2011, issued under Section 148 of the Income Tax Act, 1961, by which the assessment for Assessment Year 2004-05 is sought to be reopened. THE reopening of the assessment is admittedly beyond the period of four years from the end of the relevant assessment year.

(3.) ADMITTEDLY the position is that the reopening in the present case, by a notice dated 8 March 2011 for Assessment Year 2004-05 is beyond the period of four years from the end of the assessment year. The reasons for reopening contain absolutely no reference to there being any failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. We, therefore, find merit in the contention of Counsel appearing on behalf of the Assessee that the primary requirement set out in the proviso to Section 147 has not been fulfilled. That apart, it is evident that in so far as the diminution in the value of investment of Rs.1.28 crores is concerned, Explanation (1)(i) was inserted into the provisions of Section 115JB by the Finance (No.2) Act, 2009 with retrospective effect from 1 April 2001. Clause (i) of Explanation (1) was introduced to include the amount or amounts set aside as provision for diminution in the value of investment. In view of the retrospective amendment of law by Parliament, the Assessing Officer may have reason to believe that income has escaped assessment. But that in itself is not sufficient for reopening an assessment beyond the period of four years. Beyond the period of four years when an assessment is sought to be reopened, there must be a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. In fact, the retrospective amendment of law by Parliament would negate the inference which is sought to be drawn of the failure to disclose material facts. In so far as the business development expenditure of Rs.10.79 lakhs is concerned, here again it is evident from the order of assessment that the claim of the assessee was disallowed by the Assessing Officer and the amount was added back to the income. Similarly, in regard to the gratuity and superannuation as well, there is merit in the contention of Learned Counsel that there is exfacie no failure on the part of the assessee to disclose the material facts. The reasons disclosed to the assessee on 11 July 2011, in fact, merely indicate a reason to believe that income has escaped assessment. There is no reference whatsoever to the formation of an opinion that there was a failure on the part of the assessee to fully and truly disclose all material facts. In these circumstances, the basis on which the reopening is sought to be effected is contrary to law. Rule is accordingly made absolute by quashing and setting aside the impugned notice dated 8 March 2011. There shall be no order as to costs.