2017 (4) TMI 1317 - AT - Income Tax

Reopening of assessment - reasons to believe - Held that - In the absence of an allegations that escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all the material facts necessary for his assessment, which is a sine qua non for assuming jurisdiction under section 147 in a case falling under the proviso thereto, any action taken by the AO is wholly without jurisdiction. This case seems to involve a matter of change of opinion which is not permissible under law. We, therefore, hold that the invoking of jurisdiction u/s 147 by the AO is impermissible and cannot be sustained. We, therefore, quash the order dated 28.03.2014 passed by the AO as bad in law. - Decided in favour of assessee.

Summary

Issues Involved:
Challenge to the order dated 01.02.2016 in appeal no. 159/14-15, A.Y. 2007-08 by the Commissioner of Income Tax (Appeals)-1, Gurgaon under section 147 of the Income Tax Act.

Analysis:

1. Reopening of Assessment after Four Years:
The appellant challenged the proceedings under section 147, arguing that the authorities erred in sustaining the additions. The appellant contended that reopening the assessment after four years without new material is impermissible under the proviso to Section 147 of the Act. The appellant's representative highlighted that a new plea of law without additional evidence can be raised at the appellate stage. The Departmental Representative, on the other hand, supported the decisions of the lower authorities.

2. Tribunal's Jurisdiction and Legal Precedents:
The appellant's representative argued that the Tribunal has wide powers to examine questions of law arising from facts available before lower authorities, even if not raised earlier. Legal precedents, such as Jute Corporation of India Limited vs. CIT and National Thermal Power Corporation Ltd. vs. CIT, were cited to support this argument.

3. Proviso to Section 147 and Assessment Timelines:
The Tribunal examined the first proviso to Section 147, emphasizing that no action can be taken after four years from the end of the relevant assessment year unless income has escaped assessment due to the assessee's failure to make a return or disclose material facts. The timeline of events in the case was analyzed to determine the validity of the action taken under section 147.

4. Lack of New Material and Change of Opinion:
The Tribunal noted that the action under section 147 was proposed beyond the four-year limit without any new material justifying income escapement. Legal precedents, such as Wel Intertrade P. Ltd vs ITO and Duli Chand Singhania Vs. ACIT, were referenced to establish that jurisdiction under section 147 cannot be assumed without the assessee's failure to disclose material facts. The Tribunal concluded that the AO's action appeared to be a change of opinion, which is impermissible under the law.

5. Decision and Outcome:
Given the lack of jurisdiction under section 147 and the absence of income escapement due to the assessee's failure to disclose material facts, the Tribunal quashed the order passed by the AO as legally flawed. As a result, the appeal of the assessee was allowed, and the Tribunal refrained from adjudicating other grounds due to the quashing of the section 147 order.

This detailed analysis of the legal judgment highlights the key issues, arguments presented, legal precedents cited, statutory provisions examined, and the ultimate decision rendered by the Tribunal in favor of the appellant.