2016 (3) TMI 1204 - AT - Income Tax

Reopening of assessment - period of limitation - reasons to believe - Held that - In the case before us for both the assessment years the four years period has expired and there was no negligence on the part of the assessee in producing the material before the Assessing Officer. This Tribunal is of the considered opinion that when the assessee has produced all the relevant material and the Assessing Officer on the basis of the material filed by the assessee during the course of assessment proceedings came to the conclusion that the income otherwise chargeable has escaped assessment there is justification for reopening the assessment after expiry of four years. In view of the above this Tribunal is of the considered opinion that reopening of assessment for both the assessment years is barred by limitation. Accordingly the orders of the lower authorities are set aside and the appeals of the assessee for both the assessment years are allowed.

Summary

Issues:
Reopening of assessment u/s 147 of the Act for assessment years 2003-04 and 2004-05.

Analysis:
The appeals were against orders of the Commissioner of Income-tax (Appeals) for the mentioned assessment years. The main issue was the reopening of assessments under section 147 of the Act. The counsel for the assessee argued that the assessments were completed under section 143(3), and the notices for reopening were issued beyond the four-year limitation period from the end of the relevant assessment years. It was contended that there was no negligence on the part of the assessee in providing necessary information during the original assessment. The Departmental Representative, on the other hand, argued that the mere production of documents does not imply full disclosure of material facts by the assessee.

The Tribunal analyzed the provisions of section 147 and the first proviso, which state that no action shall be taken after four years from the relevant assessment year unless income has escaped assessment due to the assessee's failure to disclose all material facts. The Tribunal noted that the Assessing Officer found that income had escaped assessment based on the material already submitted during the original assessment and not due to any new information. It was observed that there was no negligence on the part of the assessee in providing material, and any potential negligence would lie with the Assessing Officer for not verifying the documents earlier. Therefore, the Tribunal concluded that the reopening of assessments after the four-year period was unjustified.

Consequently, the Tribunal held that the reopening of assessments for both years was time-barred, and the orders passed by the Assessing Officer were deemed invalid. The lower authorities' decisions were set aside, and the appeals of the assessee for both assessment years were allowed. The judgment was pronounced in an open court on 18th March 2016 in Chennai.