Reassessment — Notice after four years — Condition precedent — Notice not specifying failure to disclose any material facts truly and fully by assessee — Notice and subsequent order invalid

Reassessment — Notice after four years — Condition precedent — Notice not specifying failure to disclose any material facts truly and fully by assessee — Notice and subsequent order invalid

For the A.Y. 1998-99, the assessee filed a second revised return declaring a loss as a result of demerger of its bottling division. The Deputy Commissioner issued notices u/s 143(2) and 142(1) of the Income-tax Act, 1961 along with a questionnaire. The assessee furnished the reasons for filing the revised returns of income and provided clarifications in response to the various queries raised and the balance sheet and the profit and loss account. Thereafter, the Deputy Commissioner passed an order dated 30th March, 2001 u/s 143(3), computing the assessee’s total income at nil after setting off earlier years’ losses. Aggrieved by certain disallowances made by the Deputy Commissioner, the assessee filed an appeal before the Commissioner (Appeals). The Commissioner, by an order u/s 263 directed the Deputy Commissioner to pass a fresh assessment order after considering the issues identified in his order. Thereafter, an order u/s 143(3) read with section 263 was passed. After the expiry of four years, the Deputy Commissioner issued a notice u/s 148 to reopen the assessment u/s 147.

The assessee filed a writ petition and challenged the notice. The Bombay High Court allowed the writ petition and held as under:

“i) According to the proviso to section 148 of the Income-tax Act, if the notice is issued to reopen the assessment u/s 147 after the expiry of four years from the relevant assessment year, it will be time barred unless the assessee had failed to disclose material facts that were necessary for the assessment of that A.Y. and if there is no failure to disclose, it would render the notice issued as being without jurisdiction.

ii) The reasons recorded for reopening of the assessment did not state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of the assessment year 1998-99. The notice issued u/s 148 after a period of four years for reopening the assessment u/s 147 and the consequential order passed were quashed and set aside.”