2013 (4) TMI 264 - AT - Income Tax

Re opening of assessment - assessee s objection to reopening that all details with regard to advertisement expenditure had been submitted during the course of regular assessment u/s 143(3) - CIT(A) quashed notice for reopening - Held that - It is evident that the assessee has disclosed all the relevant facts in the original assessment itself. The advertisement expenses which were capitalized in the books of account were claimed as revenue expenditure in the return of income. Therefore, the assessee made a legal claim in the return of income which was accepted by the AO in the original return. From the above reasons recorded, it is evident that there was no failure on the part of the assessee to disclose fully and truly all material facts. The CIT(A) has allowed the relief to the assessee following the decision of of Atma Ram Properties Pvt.Ltd. Vs. DCIT (2011 (11) TMI 51 - DELHI HIGH COURT) that in order to initiate proceedings for reassessment after four years, there should have been a failure on the part of the assessee to disclose material facts necessary for assessment. If the Assessing Officer had failed to apply legal provisions/section of the Income-tax Act, 1961, the fault cannot be attributed to the assessee. CIT(A) has rightly quashed the reassessment proceedings - in favour of assessee.

Summary

Issues:
Reopening of assessment under Section 147 after the expiry of four years from the end of the relevant assessment year, Failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, Legal interpretation of proviso to Section 147, Applicability of case law in quashing reassessment proceedings.

Analysis:
The appeal by the Revenue challenged the order of the learned CIT(A) for the AY 2004-05, where the assessee did not appear during the hearing. The Revenue contended that the assessee failed to disclose all material facts necessary for assessment, leading to escapement of income. However, the Tribunal noted that the original assessment was completed under Section 143(3) and the reopening was done after more than four years from the relevant assessment year. The proviso to Section 147 mandates that reopening can only occur if there is a failure on the part of the assessee to disclose fully and truly all material facts. The Tribunal analyzed the reasons recorded for reopening, which indicated that the assessee had disclosed all relevant facts during the original assessment, specifically regarding advertisement expenditure. As per the Tribunal, there was no failure on the part of the assessee to disclose necessary facts.

The Tribunal further referenced a decision of the Hon'ble Jurisdictional High Court, which emphasized that for reassessment after four years, there must be a failure on the part of the assessee to disclose material facts necessary for assessment. The court clarified that the assessee is not required to disclose legal provisions but must provide full and true disclosure of material facts. In light of this legal interpretation and the facts of the case, the Tribunal upheld the decision of the CIT(A) to quash the reassessment proceedings under Section 147/148. Consequently, the appeal filed by the Revenue was dismissed.

In conclusion, the Tribunal found that the assessee had not failed to disclose all material facts necessary for assessment, as evidenced by the details provided during the original assessment. The legal provisions and the interpretation of relevant case law supported the decision to quash the reassessment proceedings. Therefore, the Tribunal upheld the order of the CIT(A) and dismissed the Revenue's appeal.