2013 (6) TMI 481 - AT - Income Tax

Reopening of assessment - Adoption of incorrect total turnover resulted in excess allowance of deduction u/s 80HHE entailing short levy of tax - CIT(A) quashed reassessment notice - Held that - CIT (A) quashed the assessment order by allowing the appeal of the assessee not only on the issue of reopening have been barred by limitation but also on the issue of that reopening is based on change of opinion without giving any opportunity to the AO in this regard. The CIT(A) appeal has also not given any specific finding after investigating the facts whether there is failure on part of the assessee to make the return u/s 139 or in response to notice issued under (1) of section 142 or section 148 or there is failure on the part of the assessee to disclose fully and truly material facts necessary for his assessment. Such specific finding could have been given after giving the opportunity to the AO, thus in the absence of such opportunity being given CIT(A) has acted against the principle of nature justice in reaching the conclusion that the reopening is barred by limitation. The clear cut finding of the CIT(A) is necessary. Assessee has taken the ground that the assessment has been made without issuing the notice under section 143(2) but the CIT(A) has not adjudicated this issue also. Thus set aside the order of the CIT(A) and restore this issue to the file of the CIT(A) to re adjudicate the issue afresh after giving the appropriate and reasonable opportunities to both the parties - in favour of revenue for statistical purposes.

Summary

Issues:
1. Validity of quashing reassessment proceedings under section 147 of the IT Act, 1961.

Analysis:
The appeal was filed by the Revenue against the order of CIT(A)-XIII, New Delhi, challenging the quashing of reassessment proceedings under section 147 of the IT Act. The original assessment was completed under section 143(3) on a certain income. Subsequently, a notice was issued under section 148 due to discrepancies in the deduction admissible under section 80HHE. The approval of the Commissioner of Income Tax was obtained for the reassessment proceedings. The assessee objected to the initiation of reassessment proceedings, citing reasons such as the proceedings being barred by limitation, lack of bona fide reasons, and change in opinion. The CIT(A) quashed the assessment order, relying on legal precedents and declaring the reopening invalid. The appeal was allowed, and the reassessment was deemed unnecessary.

The Revenue contended that the CIT(A) did not consider whether there was a failure on the part of the assessee to disclose all material facts necessary for assessment. It was argued that the CIT(A) solely relied on the submissions of the assessee without giving the Assessing Officer an opportunity to counter them. On the other hand, the assessee argued that the reasons recorded by the assessing officer did not show any failure on their part to disclose material facts fully and truly. Legal precedents from the jurisdictional High Court and Bombay High Court were cited to support this argument.

Upon careful consideration of the submissions and relevant legal precedents, it was observed that the reopening of assessment proceedings cannot be initiated after four years if there is no failure on the part of the assessee to file returns or disclose material facts. The CIT(A) was criticized for not giving the Assessing Officer an opportunity to counter the assessee's submissions and for not providing a specific finding regarding the failure to disclose material facts. It was concluded that the CIT(A) had acted against the principles of natural justice by quashing the reassessment solely based on limitation grounds without a clear finding. The order of the CIT(A) was set aside, and the issue was restored for re-adjudication with appropriate opportunities for both parties.

In conclusion, the appeal filed by the Revenue was allowed for statistical purposes, and the case was remanded for a fresh adjudication by the CIT(A) to ensure fairness and adherence to legal principles.