Recently, in the case of ACIT Chennai v. Apollo Hospital Enterprises Ltd, division bench of the Madras High Court upheld the order of the single bench that notice for re-assessment after four years of completing the assessment is invalid if the AO has not recorded any reason for re-assessment. The bench observed that such a notice is not sustainable under section 148 for the Income Tax Act.
The petitioner-Company runsa hospital for diagnosis, mitigation and treatment of ailments and diseases in different parts of the country. While filing income tax returns for the relevant assessment year, the petitioner howed NIL income and had claimed deduction for expenditure incured on software procured for MRI and Cardio Vascular System Cathlab machines. The original return was accepted by the AO in the year 2000. However, in 2005, the petitioner received a notice for re-assessment without recording any reason.
When the petitioner challenged the notice before the High Court, the single bench quashed the same by holding that whenever a notice is issued by the Assessing Officer beyond a period of four years from the end of the relevant assessment year, such notice being issued without recording the reasons for his belief that income escaped assessment, it cannot be presumed in law that there is also a failure on the part of the assessee to file the returns referred to in the proviso or a failure to fully and truly disclose the material facts. Unless the said condition is satisfied, the assessing officer does not acquire the jurisdiction to initiate proceedings under section 148 of the Act after expiry of four years from the end of assessment year.In case where it is beyond four years from the end of assessment year, the assessing officer must necessarily record not only the reasons to believe that the income has escaped assessment, but, also it is on account of failure on the part of the assessee to disclose the material facts fully and truly and failure on the party of the assessing officer to do so would vitiate the entire proceedings. The Revenue challenged the said order before the division bench.
Concurring with the findings of the single bench, the division bench emphasizes that the decision of the single bench was based on the settled legal position that the proceedings initiated is barred by limitation as per section 147 of the Act.”
Diving deeply into the facts of the case, the bench noted that the assessment was in respect of the year 1997-98. The re-assessment proceedings were initiated in the year 2005 and the reason recorded was the assessment was not shown to be the failure on the part of the assessee in disclosing the returns with full and true material facts.Such being the case, no care has been taken to issue the notice within four years from the end of the assessment.
“Even in the penultimate para of the impugned order of the learned Single Judge, it has been observed that no proof had been brought to the notice of the court that the notice has been served before the expiry of six years period and it has been accepted that the same has been served on the writ petitioner on 10.2.2005, however, a stand has been taken by the Department that the notice must have been sent by registered post but, since the proof for the same has not been filed before the court, the court cannot accept the stand of the learned counsel for the Department. Further, it has been observed by the learned Single Judge that though the wordings used in the section concerned is issue of notice, that does not mean affixing the signature itself will amount to issue of notice, but, the said notice has to be set in motion to get the meaning of the term ‘issue of notice’ and as far as the case in hand is concerned, since the notice has been served on the petitioner by hand delivery only in February 2005, in the absence of contention to the contrary, the stand of the assessee has to be accepted. It has been observed further that though the Department had relied on explanation (1) to Section 147 of the Act and contended that mere furnishing of the account book is not sufficient and particulars should have been given, this should have been disclosed in the notice concerned in detail, but, in the absence of the same, this court cannot accept the stand of the Department.”
Read the full text of the Judgment below.
