2016 (7) TMI 1234 - HC - Income Tax

Validity of reopening of assessment - failure on the part of the assessee to include certain specified items for the purpose of computation of deduction under Section 80HHC - Held that - The relevant assessment year is 1997-98 which ended on 31st March, 1998. The order under section 147 was passed on 3rd February, 2005, that is to say, long after four years, after 31st March, 1998, the time to pass an order under section 147 had expired on 31st March, 2002. The revenue could have obtained extension provided there was any failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment. It is nobody s case that the assessee had failed to file return or had failed to make necessary disclosures. Therefore, the assessment under section 147, if any, could only be made within 31st March, 2002. The assessment made in 2005 is clearly barred by limitation. We do not as such find any infirmity in the order passed by the learned Tribunal in allowing the appeal preferred by the assessee.

Summary

Issues:
Challenge to judgment by Income Tax Appellate Tribunal regarding assessment year 1997-98 under Section 147 of the Income Tax Act.

Analysis:
The High Court of Calcutta addressed the challenge to a judgment and order dated 24th August, 2007, passed by the Income Tax Appellate Tribunal concerning the assessment year 1997-98. The Tribunal had allowed the appeal by the assessee, leading to the revenue's appeal. The substantial question of law raised was whether the Tribunal erred in setting aside the Assessing Officer's order under Section 147/144 of the Income Tax Act, related to the computation of deduction under Section 80HHC. The assessment year in question ended on 31st March, 1998, and the order under Section 147 was passed on 3rd February, 2005, well beyond the four-year limitation period that expired on 31st March, 2002. The Court highlighted that for an assessment under Section 147 to be valid, there must be a failure on the part of the assessee to file a return or disclose all material facts. In this case, since there was no failure on the part of the assessee in filing the return or making necessary disclosures, the assessment made in 2005 was deemed to be time-barred. Consequently, the Court found no infirmity in the Tribunal's decision to allow the appeal by the assessee.

The Court concluded that the assessment made in 2005, long after the expiration of the limitation period, was clearly barred by law. As such, the Court answered the substantial question of law in the negative, favoring the assessee. Therefore, the appeal by the revenue was dismissed, upholding the Tribunal's decision to allow the appeal by the assessee.