2010 (2) TMI 852 - AT - Income Tax

Reopening of assessment - Assessing Officer had called for the information including the share capital introduced by the assessee. The assessee has given reply the entire information was available with the Assessing Officer when original assessment was made. The Assessing Officer on receipt of information from Investigation Wing had recorded reasons for reopening of assessment - Held that - Assessing Officer failed to record reasons that there was failure on the part of the assessee to disclose fully and truly all necessary facts for completion of his assessment. The reasons recorded are vague in nature. Therefore reopening of assessment is bad in law in view of decision of Hon ble Delhi High Court in the case of Haryana Acrylic Manufacturing Co. (P) Ltd. (2008 - TMI - 31355 - DELHI HIGH COURT) there is no whisper or allegation that there has been failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. assessment made by the Assessing Officer is annulled appeal filed by the assessee is allowed.

Summary

Issues:
Assumption of jurisdiction under section 147 of the Income-tax Act for Assessment Year 2001-02.

Detailed Analysis:
1. The original return of income for Assessment Year 2001-02 declared a loss of Rs. 11,481. The Assessing Officer completed assessment under section 143(3) on 19/3/2004. Subsequently, the Assessing Officer received information suggesting that the assessee was involved in providing entries to various beneficiaries. Based on this information, the Assessing Officer reopened the assessment under section 147 by issuing a notice under section 148 dated 31/3/2008.

2. During the assessment proceedings, it was noted that the assessee introduced fresh share capital of Rs. 4,95,00,000 during the financial year 2000-01. However, the Assessing Officer found discrepancies in the details provided by the assessee regarding the source of the share capital. The Assessing Officer added the amount of Rs. 4,95,00,000 as undisclosed income along with an additional amount of Rs. 3,59,400 on account of commission income.

3. The assessee challenged the assumption of jurisdiction under section 147 during the appellate proceedings. The ld. CIT(A) upheld the reopening of assessment, stating that the Assessing Officer had followed due procedure based on information indicating possible income escaping assessment.

4. The appellant argued that the notice under section 148 was issued just before the expiry of the six-year limit, and the Assessing Officer did not have substantial grounds to reopen the assessment. The appellant contended that all necessary facts were disclosed during the original assessment, and there was no failure on their part to provide material for assessment.

5. The Tribunal analyzed the reasons recorded by the Assessing Officer for reopening the assessment. It was observed that the reasons lacked specific details indicating a failure on the part of the assessee to disclose material facts necessary for assessment. The Tribunal cited relevant case laws emphasizing the importance of establishing such failure before reopening an assessment beyond the four-year period.

6. The Tribunal concluded that the Assessing Officer failed to provide sufficient grounds for assuming jurisdiction under section 147. The reasons recorded were deemed vague and did not meet the legal requirements for reopening the assessment. As a result, the Tribunal annulled the assessment and allowed the appeal filed by the assessee.

7. The Tribunal's decision to annul the assessment was based on the lack of concrete evidence of the assessee's failure to disclose material facts necessary for assessment. Since the jurisdictional issue was resolved in favor of the assessee, the Tribunal did not delve into the other grounds raised in the appeal.

8. The final order was pronounced on 28.2.2010, annulling the assessment due to the lack of valid grounds for assuming jurisdiction under section 147.