2014 (8) TMI 1140 - AT - Income Tax

Reopening of assessment - full and true disclosure of all material facts - change in share holding pattern of the assessee company provisions of sec.79 - Held that - In the present case, as the facts narrated in the original assessment order regarding change of share holding pattern which has been acknowledged by the AO in Para 2 of its Order dated 24.03.2006 it is obvious that all the necessary facts were disclosed by the assessee. In the reasons recorded for reopening, the AO acknowledges this position but proceeds with his satisfaction on the ground that applicability of Sec.79 was not examined by the Assessing Officer. As stated above after disclosing all the material evidences, it was not for the assessee to lead the AO as to what inferences could be drawn by him as this work falls in the domain of the AO. It is undisputed that the assessee had disclosed all the material facts relevant for the assessment. As per proviso to Sec.147, the AO could not exercise jurisdiction to reopen the assessment after lapse of four years. CIT(A) was justified in holding that the Assessing Officer lacked jurisdiction to reopen the assessment proceedings by virtue of operation of 1st proviso to Sec.147 and accordingly reopening was rightly held as not valid. - Decided against revenue.

Summary

Issues Involved:
1. Validity of the reopening of assessment under Section 147 of the Income Tax Act.
2. Eligibility of set-off of business losses under Section 79 of the Income Tax Act.
3. Whether the assessee made full and true disclosure of material facts necessary for assessment.

Detailed Analysis:

1. Validity of the Reopening of Assessment:
The primary issue was whether the reopening of the assessment for A.Y. 2003-04 was justified. The Revenue argued that the reopening was valid as the assessee did not make full and true disclosure of all material facts necessary for its assessment. However, the CIT(A) found that all necessary facts were disclosed by the assessee during the original assessment, and the reopening was based on the Assessing Officer's failure to consider the applicability of Section 79 at that time. The CIT(A) held that the reopening was invalid as it was done after four years from the end of the relevant assessment year, violating the proviso to Section 147 of the Income Tax Act. This decision was upheld by the Tribunal, which agreed that the assessee had disclosed all material facts and that the Assessing Officer's failure to apply Section 79 did not justify reopening the assessment.

2. Eligibility of Set-off of Business Losses:
The second issue was whether the assessee was eligible to set off business losses from A.Y. 1997-98 and A.Y. 1998-99 in light of the change in shareholding pattern. The Revenue contended that the change in shareholding triggered Section 79 of the Income Tax Act, which disallows the set-off of losses if there is a change in shareholding of more than 51%. The CIT(A) did not comment on the merits of this issue due to the invalidity of the reopening. The Tribunal also refrained from commenting on this issue, as the primary ground for invalidating the reopening was upheld.

3. Full and True Disclosure of Material Facts:
The Revenue argued that the assessee did not make full and true disclosure of material facts necessary for the assessment. The assessee countered that all relevant facts, including the change in shareholding, were disclosed during the original assessment. The CIT(A) found that the assessee had indeed disclosed all necessary facts, and the failure to apply Section 79 was the Assessing Officer's oversight. The Tribunal agreed, stating that the duty of the assessee is to disclose all primary facts, not to guide the Assessing Officer on the inferences to be drawn from those facts.

Separate Judgments:
The Tribunal's decision was unanimous, and no separate judgments were delivered by the members.

Conclusion:
The Tribunal upheld the CIT(A)'s decision that the reopening of the assessment was invalid due to the lapse of four years and the full disclosure of material facts by the assessee. Consequently, the appeals filed by the Revenue were dismissed.