2015 (10) TMI 2617 - AT - Income Tax

Reopening of assessment - assessee has contravened the provisions of section 13(1)(c), 13(3) and section 11(4), as a result of which capital expenditure has to be disallowed - Held that - On a perusal of the reasons recorded for re opening, we do not find any such allegation made by the Assessing Officer which satisfies the condition of proviso to section 147. On the contrary, as it appears, the re opening of assessment is on the basis of facts and material which are already disclosed by the assessee either in the return of income or during the original assessment and on the basis of which the original assessment was made. No new tangible material has come to the possession of Assessing Officer to form a belief that income has escaped assessment. It is also pertinent to mention here, in the appeal preferred against the original assessment order, Commissioner (Appeals) has accepted assessee s claim of exemption under section 11 of the Act. Thus there being no failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, the re opening of assessment on a change of opinion, that too, after expiry of four years from the end of relevant assessment year is invalid. - Decided in favour of assessee

Summary

Issues:
Validity of re-opening of assessment under section 147 after the expiry of four years from the end of the relevant assessment year.

Analysis:
The appeal by the Department was against the order passed by the Commissioner (Appeals) for the assessment year 2004-05, where the re-opening of assessment was held invalid, resulting in the annulment of the assessment. The original assessment was completed under section 143(3) of the Act, determining the total income and disallowing the claim of exemption under section 11. The re-opening of the assessment was based on the alleged contravention of certain sections, leading to additional disallowances. The Commissioner (Appeals) annulled the assessment, citing that the re-opening was unjustified as all material facts were already disclosed by the assessee during the original assessment, and there was no failure to disclose necessary information.

The first appellate authority highlighted that the Assessing Officer did not consider the previous order of the Commissioner (Appeals) allowing the exemption under section 11 before re-opening the assessment. It was emphasized that there was no failure on the part of the assessee to disclose all relevant facts for the assessment, rendering the re-opening invalid. The re-assessment order was challenged, and the Commissioner (Appeals) observed that the re-opening was based on the same set of facts and materials already considered during the original assessment, making it a case of change of opinion rather than new information justifying re-assessment.

The Tribunal noted that the re-opening was done after the expiry of four years from the relevant assessment year, triggering the proviso to section 147. It was concluded that there was no failure on the part of the assessee to disclose all material facts, as the re-assessment was based on existing information and a change of opinion rather than new evidence. The Tribunal upheld the decision of the Commissioner (Appeals) in annulling the assessment, stating that the re-opening of assessment under section 147, after the expiry of the specified period, without any failure to disclose necessary facts, was invalid. Consequently, the Revenue's appeal was dismissed.

In conclusion, the judgment focused on the legality of re-opening an assessment under section 147 after the lapse of the prescribed period, emphasizing the requirement of a failure to disclose material facts by the assessee. The decision highlighted that re-assessment based on the same facts considered in the original assessment, without new tangible material, and after the acceptance of certain claims in previous proceedings, was not valid. The Tribunal affirmed the annulment of the assessment, underscoring the importance of adhering to legal provisions and due process in tax assessments.