Tecumseh Products India Pvt. Ltd., vs. The Asst. Commissioner of Income tax,

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WP/3625/2013HC TelanganaHBHC01017652201329 November 20135 pages
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What did the High Court hold?

The Tribunal held that for a notice under Section 147 to be issued after the expiry of four years from the end of the relevant assessment year, the conditions laid down in the first proviso to Section 147 must be fulfilled. These conditions require the Assessing Officer to be satisfied that income chargeable to tax has escaped assessment due to the assessee's failure to furnish a return, respond to a notice, or disclose all material facts. The Tribunal found that these conditions were not reflected in the notice itself. Consequently, the exercise of jurisdiction in issuing the notice was considered patently illegal. The Tribunal set aside the notice dated March 30, 2012, and the consequential order dated January 15, 2013. However, it granted liberty to the Revenue to proceed in accordance with law if there existed strong grounds for issuing such a notice, taking an impartial decision based on the records.

What were the facts?

The petitioner, Tecumesh Products India Pvt. Ltd., filed a writ petition challenging a notice issued under Section 147 of the Income Tax Act, 1961, for reopening the assessment for the assessment year 2005-06. The notice was dated March 30, 2012, which is more than four years after the end of the relevant assessment year. The petitioner argued that the notice was issued beyond the permissible time limit without fulfilling the conditions stipulated in the first proviso to Section 147. The revenue contended that conditions for issuing the notice were met. The Tribunal was to decide on the validity of the reopening notice.

What were the issues?

1. Whether the notice issued under Section 147 of the Income Tax Act, 1961, for reopening the assessment for assessment year 2005-06, dated March 30, 2012, is valid, given that it was issued more than four years after the end of the relevant assessment year? Assessee's Contention: The notice is invalid as it was issued beyond the four-year period stipulated in the first proviso to Section 147, and the conditions for reopening after four years were not met. The issuance of such a notice without fulfilling these conditions is patently illegal. Revenue's Contention: The revenue submitted that there were conditions in this regard, implying that the conditions for reopening were satisfied. However, no specific arguments or reliance on authorities were detailed in the judgment regarding how these conditions were met.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3),Section 139,Section 142(1),Section 148

AI-generated summary — verify with the full judgment below

THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR

Writ Petition No.3625 of 2003

DATED:29.11.2013

Between: Tecumesh Products India Pvt. Ltd., Hyderabad. … Petitioner

And

The AssistantCommissioner of Income Tax, Hyderabad and another.

….Respondents

THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE SRI JUSTICE SANJAY KUMAR

Writ Petition No.3625 of 2003

Order: (per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta)

This writ petition has been filed challenging the notice issued under Section 147 of the Income Tax Act, 1967 (for short ‘the Act’) for reopening the assessment in relation to assessment year 2005-06. The notice has been issued for reopening of the assessment with a date, if we take it, on 30.3.2012. Therefore, going by arithmetic calculation, it is more than four years. It is not the law that delayed notice cannot be issued, it can be, provided that the conditions as mentioned in the first proviso to Section 147 of the Act are fulfilled. We, therefore, set out the first proviso to Section 147 as hereunder: “Provided that where an assessment under sub- section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year.”

It is clear that before any notice is issued after expiry of four years, the officer concerned must be satisfied that there has been an escapement in assessment of income, which is chargeable to tax and this is because of the failure on the part of the petitioner-assessee to make a return under Section 139 of the Act or in response to a notice issued under sub-section (1) of Section 142 or Section 148 for not disclosing the material facts. Therefore, the aforesaid conditions are sine qua non. In other words, the aforesaid conditions must reflect in the notice itself. In the absence of the same, exercise of jurisdiction in issuance of the notice under aforesaid provision is patently illegal. To draw an analogy, if the plaint does not disclose any cause of action in a suit, then such plaint is liable to be rejected. Similarly, if a complaint lodged under Section 154 of the Code of Criminal Procedure does not disclose prima facie, any cognizable offence, then such a complaint is liable to be quashed. The Legislature has created a right in favour of the assessee that assessment which has been made cannot be reopened after expiry of four years. But, such right is sought to be taken away in the situation as mentioned in the first proviso. Unless that situation exists, the issue is always a closed chapter. Mr.J.V. Prasad, learned counsel appearing for the Revenue submits that there are conditions in this regard. Unfortunately, as rightly pointed out by Mr. Ratnakar, nothing has been disclosed or shown even in the subsequent stages. Under the circumstances, we have no option, but to set aside the first notice dated 30.3.2012 and the consequential steps being order dated 15.1.2013 issued by respondent No.2. However, it would be open for the Revenue, if so advised, to

proceed in accordance with law taking impartial decision by taking note of the records, if there exists a strong ground for issuance of such notice. The writ petition is accordingly disposed of.

Consequently, the miscellaneous applications, if any pending, shall also stand disposed of. No costs.

_____________________ K.J. SENGUPTA, CJ

_________________ SANJAY KUMAR, J 29.11.2013

PNB

If the Assessing Officer, has no 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 153, assess or reassess 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 this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year).

Provided further that nothing contained in the first proviso shall apply in case where any income in relation to any asset (including financial interest in any entity located outside India, chargeable to tax,has escaped assessment for any assessment year.”

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