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Issues involved: Challenge to the validity of reassessment proceedings u/s 147 of the Income Tax Act, 1961, based on failure to disclose material facts u/s 143(3) for the assessment year 1998-99.
Summary: The Appellate Tribunal ITAT Lucknow heard an appeal and cross objection challenging the correctness of the CIT (A)'s order regarding the assessment u/s 143(3) r.w.s. 148 of the Income Tax Act, 1961, for the assessment year 1998-99. The cross objection raised the issue of the validity of the reassessment proceedings due to the expiry of four years from the original assessment and the lack of failure on the part of the assessee to disclose material facts. The Tribunal considered the legal position and factual matrix of the case. The assessee contended that the assessment completed u/s 143(3) cannot be reopened after four years from the end of the relevant assessment year without any failure on the part of the assessee to disclose material facts. The reasons recorded for reopening the assessment did not indicate any such failure. The Departmental Representative argued that there were sufficient reasons to conclude that income had escaped assessment due to the failure to disclose all material facts. The Tribunal noted that the law restricts reopening assessments completed u/s 143(3) beyond four years if there was a failure to disclose material facts. The reasons recorded for reopening did not fulfill this condition. Citing legal precedent, the Tribunal emphasized that reasons recorded by the Assessing Officer must be relied upon, and the absence of any failure to disclose material facts rendered the reassessment proceedings invalid. Consequently, the reassessment proceedings were quashed. Since the reassessment proceedings were quashed, the issues regarding the correctness of additions made during the reassessment proceedings were deemed academic and not adjudicated upon. The cross objection filed by the assessee was allowed, and the appeal by the Assessing Officer was dismissed as infructuous.
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