Relief to Milton Plastics: Bombay HC quashes Re Assessment Notice in absence of material for basis for Assumption of Jurisdiction [Read Order]

Milton - Plastics - Re - Assessment - Notice - Assumption - Jurisdiction - TAXSCAN

In a major relief to Milton Plastics Limited, the Bombay High Court quashed the re assessment notice in the absence of material to form the basis for assumption of jurisdiction.

By the writ petition invoking the jurisdiction under Article 226 of the Constitution of India, the Petitioner impugns Notice issued by the Respondent No.1 – Deputy Commissioner of Income Tax under Section 148 of the Income Tax Act, 1961 (“the Act”) alongwith order dismissing the Petitioner’s objections to reopening of assessment for the Assessment Year 1997-98.

It is the Petitioner’s contention that it filed its return of income for the previous year, in which it disclosed two transactions with M/s. Gremach CNC Limited and M/s. Technology Plastics Limited, being sale and lease back transactions of machinery, on which it had claimed depreciation at 100%, alongwith lease rental income on such assets from these two entities.

The Revenue later issued a notice under Section 148 of the Act, claiming that some income of the Petitioner had escaped assessment and called upon the Petitioner to file a return, which the Petitioner did on 08.09.1998 without prejudice to its contention that reopening of assessment was impermissible. It is the Petitioner’s submission that when the Respondent No.1 furnished reasons for issuing notice under Section 148 of the Act.

Ajaykumar R. Singh, Counsel for the Petitioner, submitted that the assessee had not failed to disclose all material facts in previous assessment years, where all material and transactions were before the Assessing Officer disclosed truly and fully, and as such, the reopening of assessment after four years, was without any jurisdiction vested in the Assessing Officer.

Akhileshwar Sharma, Counsel appearing for the Respondents supported the impugned order and argued that the material relied upon by the Assessing Officer to invoke Section 147 of the Act, was justified as the material relied upon had not been previously disclosed by the Petitioner in earlier assessments for the relevant years, and hence, reopening of assessment was justified.

The Court of Justices Dhiraj Singh Thakur and Valmiki Sa Menezes observed that “In the present case, there is clearly a failure on the part of the Assessing Officer to set out such material that provided the basis for assumption of jurisdiction under Sections 147 and 148 of the Act. Such material not being available in the notice, the impugned notice dated 22.03.2004 is clearly without jurisdiction and the same is unsustainable.”

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