Taxation laws always seemed to have struggled on this aspect of reopening of
completed assessment. Why so? Aren't the statutes enough for providing
reasonable grounds for reopening or is it that the statute branches out its arms
for the courts to interpret them meaningfully to suit the needs of time? The
article seeks to address and unfold the mystery behind the rationale of court in
the case of Tumkur Minerals Pvt Ltd. v. Joint Commissioner of Income tax.
Analysis Of The Judgment
In this case, the Petitioner challenged re-opening of the assessment by the
assessing officer for the Assessment Year (AY) 2012-13 despite full disclosure
of the material facts. The Assessing Officer issued the impugned notice dated
29.03.2019 under Section 148 of the Income Tax Act, 1961 (IT Act), seeking to
reopen after expiry of four years from the relevant Assessment Year.
had sought reasons from the assessing officer by filing an objection which was
deliberately brushed aside by the assessing officer by not stating the reasons
on strong grounds. Therefore, the assessing officer in this case, clearly lacked
the jurisdiction to reopen assessment after four years.
The striking features of this judgement is that it had lucidly explained the
jurisdiction of assessing officer and had set an embargo upon the officer in
using his powers arbitrarily. The case of Nagri Mills v. CIT Ltd[
brought into picture which emphasized that the assessing officer must not stress
upon the year of assessment especially when the tax rates have remained uniform
for the previous and relevant assessment years.
The practice which the court desires the assessing officer to stick to was that
he must state the reasons in the notice for reopening of the assessment in a
clear and unambiguous manner and that it must not suffer from any vagueness. The
reasons recorded must clearly reflect the manifestation of his mind. The reasons
not be such that it leaves the assesse guessing. It must be self-explanatory
keeping in view the benchmark of understanding of a rational prudent person.
The necessity of stating and communicating the proper reasons more importantly
reassessment after a period of four years from relevant assessment year has been
highlighted in the case of Hindustan Lever Ltd. V/s. R.B. Wadkar
"He must disclose in the reasons as to which fact or material was not disclosed
by the assesse fully and truly necessary for assessment of that assessment year,
so as to establish vital link between the reasons and evidence. That vital link
is the safeguard against arbitrary re-opening of the concluded assessment."
The court further provides for strict vigilance by stating that the reasons
communicated through notice cannot be supplemented by making oral submissions or
by filing an affidavit.
By taking a lead from the case of Titanor Components Ltd. V/s. Assistant
Commissioner of Income Tax it was pointed out that there is a notable
difference between a wrong claim by an assessee after disclosing the true and
material facts and the wrong claim made by the assessee by withholding material
facts fully and truly. Only in the latter case would the Assessing Officer be
entitled to re-open the assessment after four years.
It is also to be noted that for reassessment, the definition of "tax" under
section 2(43) does not include penalty or interest. Similarly, under section
156, it is provided that when any tax, interest, penalty, fine or any of other
sum is payable in consequence of any order passed under this Act, the Assessing
Officer shall serve upon the assessee a notice of demand as prescribed. The
provisions for imposition of penalty and interest are distinct from the
provisions for imposition of tax." was the interpretation given by the honorable
court in the case of Arthur Anderson v. Assistant Commissioner of Income Tax
Taking a cue from Commissioner of Income-Tax Versus Aditya Builders, more
attention was paid towards the fact that reassessment cannot be conducted by
assessing officer merely upon the ground of method of accounting specifically
when a certain method of accounting was practiced by assesse for previous years
according to the approved standards prescribed by law.
After thorough analysis, it could inferred that reopening would be permitted
only on failure of assesse to disclose the material facts and not due to
negligence on part of the assessing officer to assess the material facts fully.
Therefore onus is placed upon the assessing officer to carry on the assessment
with due care. Therefore before initiation of re assessment, the twin conditions
to be fulfilled are:
- Assessing officer has reason to believe that income chargeable to tax
has escaped assessment.
- Such failure was due to on part of the assesse in disclosing the
material facts. Therefore in the present case Petition was allowed due to
failure of officers in applying the principles of law.
For the purpose of application of Sec.148 of the Income tax Act, it is
extremely necessary for the assesse that he should have filed return and must
seek reasons for issuance of notice. On receipt of reasons, file an objection
otherwise it would be liable to be dismissed as Pre mature writ petition as it
was done in the case of Gkn Driveshafts (India) Ltd vs Income Tax Officer And
Ors on 25 November, 2002. Therefore the courts have given preference to
Interpretation fulfilling the object of the Act.
Written By: Vaishnavi S,
- Writ petition no. 1061 of 2019
- (1958) 33 ITR 681 (Bom)
- (2004) 137 Taxman 479 (Bom)
- (2012) 20 taxmann.com 805 (Bombay)
- (2010) 324 ITR 240
- (2015) 378 ITR 75
Student at V.M. Salgaocar College of Law, Goa