The reopening notice came after four years and the recorded reasons say nothing about my failing to disclose material facts. Is that fatal, and does it matter that the reasons reached me a year later?
Both points went in the assessee's favour. The Delhi High Court quashed the section 148 notice, the order rejecting objections and all proceedings under them. Where the proviso to section 147 applies, the reasons must themselves allege failure to disclose fully and truly all material facts; the reasons supplied here contained no such allegation, and a differently worded form produced later with the counter-affidavit could not be substituted for them. The Court also held that reasons must be furnished within the six year outer limit in section 149, since the notice and the communication of reasons go hand in hand. On the merits the assessee had disclosed everything the officer asked for.
Decided by the High Court (High Court of Delhi at New Delhi - Hon'ble Mr Justice Badar Durrez Ahmed and Hon'ble Mr Justice Rajiv Shakdher; judgment by Badar Durrez Ahmed, J) on 2008-11-03, reported as WP(C) 4074/2007 (Delhi High Court). It bears on section 147, section 148, section 149 of the Income Tax Act 1961, in Reassessment & Reopening and Cash Credits & Unexplained Money matters.
This is one of the most heavily cited reassessment judgments from the Delhi High Court, and it gives a practitioner three separate grounds. First, the jurisdictional one: beyond four years the recorded reasons must contain the allegation of failure to disclose, following Duli Chand Singhania, and its absence is not curable. Second, a limitation point that goes further than most cases - a notice issued inside the six year period is still bad if the reasons are not communicated within that period, because GKN Driveshafts requires reasons within a reasonable time and reasonable time cannot outrun section 149. Third, it explains why Phool Chand Bajrang Lal, the Revenue's usual answer, is confined to section 147 as it stood before the 1989 amendment, when clause (b) allowed reopening within four years on information alone; the amended section contains no reference to information at all.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee filed a return for assessment year 1998-99 on 30 November 1998 declaring nil income. In the assessment proceedings it was asked for details of share application money and by letter of 5 March 2001 filed bank statements, particulars of the cheques received and a confirmation from Hallmark Healthcare Limited. The assessment was completed under section 143(3) on 7 March 2001 at nil income with unabsorbed depreciation of Rs 20,21,235 carried forward, the order recording that details as required were filed and verified. On 29 March 2004 a notice under section 148 was issued. The assessee replied on 11 May 2004 asking that the original return be treated as the return and seeking the recorded reasons. The reasons were supplied only in September 2004; they said that the assessee had taken accommodation entries from Hallmark Healthcare Limited, one of the companies of Sanjay Rastogi, by a cheque of Rs 5,00,000 dated 17 October 1997, and contained no allegation of failure to disclose. Objections were filed on 9 November 2004. Before disposing of them the officer issued a notice under section 143(2), and the objections were rejected by a speaking order of 2 March 2005 which recorded that during the assessment the assessee had filed details of the Rs 5 lakh share application money. A counter-affidavit filed on 5 November 2007 annexed a form recording reasons in different terms, this time alleging failure to disclose fully and truly.
The writ petition was allowed. The notice of 29 March 2004 under section 148, the order of 2 March 2005 rejecting the objections, and all proceedings pursuant to the notice were set aside, the parties bearing their own costs. The reasons actually supplied contained no allegation that the assessee had failed to disclose fully and truly all material facts, which is the condition for action beyond four years under the proviso to section 147. The form annexed to the counter-affidavit, which did contain such an allegation, was not communicated within a reasonable time, and the period between 11 May 2004 and 5 November 2007 could not be regarded as reasonable. Where a notice is issued within six years but the reasons are not furnished within that period, proceedings pursuant to the notice are barred by limitation, since the notice and the furnishing of reasons go hand in hand and reasonable time cannot extend beyond the six years in section 149. On the merits, the assessee had not failed to disclose fully and truly all material facts.
The Court applied GKN Driveshafts: on a section 148 notice the assessee files a return and may seek the reasons, which the officer is bound to furnish within a reasonable time, after which the assessee may object and the officer must dispose of the objections by a speaking order. Reading that with section 149(1)(b), which fixes six years from the end of the relevant year where the escaped income is a lakh or more, the Court held that a notice without communication of reasons is meaningless and that the reasonable time for furnishing reasons cannot be stretched past the statutory outer limit, which here expired on 31 March 2005. On the substantive condition, following Duli Chand Singhania, the sine qua non for jurisdiction under the proviso is an allegation in the reasons of failure to disclose, and there was none. The Court distinguished Phool Chand Bajrang Lal as a decision on section 147 before the 1989 amendment, when clause (a) covered failure to disclose with an eight or sixteen year limitation and clause (b) allowed reopening within four years on information in the officer's possession; in that setting the questions of information and of full and true disclosure were intermingled because limitation was not in issue. The amended section contains no reference to information at all, and the proviso is an exception to it. On the facts, the officer had made specific queries about the Rs 5 lakh, the assessee had produced the share application form, the confirmation and the bank statement, and the assessment order itself recorded that the details were filed and verified. Following Madnani Engineering Works, an assessee does not fail to disclose by not confessing that documents produced were bogus; it was for the officer to investigate. He could not now retract from his own record.
In a case, where the notice has been issued within the said period of six years, but the reasons have not been furnished within that period ... any proceedings pursuant thereto would be hit by the bar of limitation
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Handle my notice → Ask a CA on WhatsAppBoth points went in the assessee's favour. The Delhi High Court quashed the section 148 notice, the order rejecting objections and all proceedings under them. Where the proviso to section 147 applies, the reasons must themselves allege failure to disclose fully and truly all material facts; the reasons supplied here contained no such allegation, and a differently worded form produced later with the counter-affidavit could not be substituted for them. The Court also held that reasons must be furnished within the six year outer limit in section 149, since the notice and the communication of reasons go hand in hand. On the merits the assessee had disclosed everything the officer asked for. This was decided by the High Court (High Court of Delhi at New Delhi - Hon'ble Mr Justice Badar Durrez Ahmed and Hon'ble Mr Justice Rajiv Shakdher; judgment by Badar Durrez Ahmed, J) and bears on section 147, section 148, section 149 of the Income Tax Act 1961. It is reported as WP(C) 4074/2007 (Delhi High Court). This is one of the most heavily cited reassessment judgments from the Delhi High Court, and it gives a practitioner three separate grounds. First, the jurisdictional one: beyond four years the recorded reasons must contain the allegation of failure to disclose, following Duli Chand Singhania, and its absence is not curable. Second, a limitation point that goes further than most cases - a notice issued inside the six year period is still bad if the reasons are not communicated within that period, because GKN Driveshafts requires reasons within a reasonable time and reasonable time cannot outrun section 149. Third, it explains why Phool Chand Bajrang Lal, the Revenue's usual answer, is confined to section 147 as it stood before the 1989 amendment, when clause (b) allowed reopening within four years on information alone; the amended section contains no reference to information at all. If it applies to you, the first step is this: Read the recorded reasons first: if the notice is beyond four years and the reasons do not allege failure to disclose fully and truly all material facts, take that as a jurisdictional objection at the threshold.
The assessee filed a return for assessment year 1998-99 on 30 November 1998 declaring nil income. In the assessment proceedings it was asked for details of share application money and by letter of 5 March 2001 filed bank statements, particulars of the cheques received and a confirmation from Hallmark Healthcare Limited. The assessment was completed under section 143(3) on 7 March 2001 at nil income with unabsorbed depreciation of Rs 20,21,235 carried forward, the order recording that details as required were filed and verified. On 29 March 2004 a notice under section 148 was issued. The assessee replied on 11 May 2004 asking that the original return be treated as the return and seeking the recorded reasons. The reasons were supplied only in September 2004; they said that the assessee had taken accommodation entries from Hallmark Healthcare Limited, one of the companies of Sanjay Rastogi, by a cheque of Rs 5,00,000 dated 17 October 1997, and contained no allegation of failure to disclose. Objections were filed on 9 November 2004. Before disposing of them the officer issued a notice under section 143(2), and the objections were rejected by a speaking order of 2 March 2005 which recorded that during the assessment the assessee had filed details of the Rs 5 lakh share application money. A counter-affidavit filed on 5 November 2007 annexed a form recording reasons in different terms, this time alleging failure to disclose fully and truly. The matter was decided on 2008-11-03 by the High Court (High Court of Delhi at New Delhi - Hon'ble Mr Justice Badar Durrez Ahmed and Hon'ble Mr Justice Rajiv Shakdher; judgment by Badar Durrez Ahmed, J). On those facts the High Court held as follows. The writ petition was allowed. The notice of 29 March 2004 under section 148, the order of 2 March 2005 rejecting the objections, and all proceedings pursuant to the notice were set aside, the parties bearing their own costs. The reasons actually supplied contained no allegation that the assessee had failed to disclose fully and truly all material facts, which is the condition for action beyond four years under the proviso to section 147. The form annexed to the counter-affidavit, which did contain such an allegation, was not communicated within a reasonable time, and the period between 11 May 2004 and 5 November 2007 could not be regarded as reasonable. Where a notice is issued within six years but the reasons are not furnished within that period, proceedings pursuant to the notice are barred by limitation, since the notice and the furnishing of reasons go hand in hand and reasonable time cannot extend beyond the six years in section 149. On the merits, the assessee had not failed to disclose fully and truly all material facts.
The Court applied GKN Driveshafts: on a section 148 notice the assessee files a return and may seek the reasons, which the officer is bound to furnish within a reasonable time, after which the assessee may object and the officer must dispose of the objections by a speaking order. Reading that with section 149(1)(b), which fixes six years from the end of the relevant year where the escaped income is a lakh or more, the Court held that a notice without communication of reasons is meaningless and that the reasonable time for furnishing reasons cannot be stretched past the statutory outer limit, which here expired on 31 March 2005. On the substantive condition, following Duli Chand Singhania, the sine qua non for jurisdiction under the proviso is an allegation in the reasons of failure to disclose, and there was none. The Court distinguished Phool Chand Bajrang Lal as a decision on section 147 before the 1989 amendment, when clause (a) covered failure to disclose with an eight or sixteen year limitation and clause (b) allowed reopening within four years on information in the officer's possession; in that setting the questions of information and of full and true disclosure were intermingled because limitation was not in issue. The amended section contains no reference to information at all, and the proviso is an exception to it. On the facts, the officer had made specific queries about the Rs 5 lakh, the assessee had produced the share application form, the confirmation and the bank statement, and the assessment order itself recorded that the details were filed and verified. Following Madnani Engineering Works, an assessee does not fail to disclose by not confessing that documents produced were bogus; it was for the officer to investigate. He could not now retract from his own record. In the words reproduced by the source cited on this page: "In a case, where the notice has been issued within the said period of six years, but the reasons have not been furnished within that period ... any proceedings pursuant thereto would be hit by the bar of limitation"
It was decided by the High Court on 2008-11-03 and is reported as WP(C) 4074/2007 (Delhi High Court). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 147, section 148, section 149, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The writ petition was allowed. The notice of 29 March 2004 under section 148, the order of 2 March 2005 rejecting the objections, and all proceedings pursuant to the notice were set aside, the parties bearing their own costs. The reasons actually supplied contained no allegation that the assessee had failed to disclose fully and truly all material facts, which is the condition for action beyond four years under the proviso to section 147. The form annexed to the counter-affidavit, which did contain such an allegation, was not communicated within a reasonable time, and the period between 11 May 2004 and 5 November 2007 could not be regarded as reasonable. Where a notice is issued within six years but the reasons are not furnished within that period, proceedings pursuant to the notice are barred by limitation, since the notice and the furnishing of reasons go hand in hand and reasonable time cannot extend beyond the six years in section 149. On the merits, the assessee had not failed to disclose fully and truly all material facts. It arises in Reassessment & Reopening and Cash Credits & Unexplained Money matters, on section 147, section 148, section 149 of the Income Tax Act 1961, and was decided by High Court of Delhi at New Delhi - Hon'ble Mr Justice Badar Durrez Ahmed and Hon'ble Mr Justice Rajiv Shakdher; judgment by Badar Durrez Ahmed, J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Ask for the reasons in writing as soon as the notice arrives, and date-stamp the request; delay in furnishing them can itself defeat the reassessment once six years from the end of the year have run. Compare the reasons supplied to you with anything the department later files in court, and object if they differ; the department cannot improve on the reasons afterwards. Put on record the queries raised in the original assessment and what you filed in reply - an assessment order reciting that details were filed and verified shows the officer applied his mind.
Validity check could not be completed. No later history was checked. The judgment predates the substituted reassessment scheme introduced from 1 April 2021, which was not considered here, and its continued application to notices under the present sections 148 and 148A has not been established from the material read. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The harvested text is clipped: about 17,000 characters from the middle are not reproduced. What is missing is part of the Court's discussion of the counter-affidavit form and of the earlier authorities, running roughly from paragraph 12 to paragraph 24. The facts, the reasons recorded, the Revenue's stand, the concluding reasoning on limitation, on Phool Chand Bajrang Lal and on full and true disclosure, and the operative order are all present. The Court's treatment of Wel Intertrade and of the other decisions cited for the petitioner falls in the unreproduced portion. The batch line carried no reporter citations, so the writ petition number is used. An earlier writ petition, WP(C) 3195/2005, was withdrawn with liberty and was not read. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The writ petition was allowed. The notice of 29 March 2004 under section 148, the order of 2 March 2005 rejecting the objections, and all proceedings pursuant to the notice were set aside, the parties bearing their own costs. The reasons actually supplied contained no allegation that the assessee had failed to disclose fully and truly all material facts, which is the condition for action beyond four years under the proviso to section 147. The form annexed to the counter-affidavit, which did contain such an allegation, was not communicated within a reasonable time, and the period between 11 May 2004 and 5 November 2007 could not be regarded as reasonable. Where a notice is issued within six years but the reasons are not furnished within that period, proceedings pursuant to the notice are barred by limitation, since the notice and the furnishing of reasons go hand in hand and reasonable time cannot extend beyond the six years in section 149. On the merits, the assessee had not failed to disclose fully and truly all material facts.
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