2014 (6) TMI 698 - AT - Income Tax

Validity of assessment u/s 147 of the Act Determination of income Held that - Reopening is permissible when some information has come to the notice of the AO subsequent to the completion of assessment and where such information was not previously disclosed - the turnover being less than Rs.40 lakhs there is no necessity for the assessee to obtain tax audit report and all these facts were already in the knowledge of the AO while making the assessment u/s 143(3) of the Act and if at all there is non application of mind on the part of the AO on the earlier occasion the assessee should not be made to suffer in the form of initiation of proceedings u/s 148 as such an exercise would amount to giving a premium to an authority exercising quasi-judicial functions, to take benefit of its own wrong. Relying upon CIT vs. ICICI Bank 2012 (7) TMI 521 - BOMBAY HIGH COURT - reopening of assessment is bad in law Decided in favour of Assessee.

Summary

Issues: Validity of reopening of assessment under section 147 r.w.s. 143(3) of the Act.

Analysis:
The appeal before the Appellate Tribunal ITAT Mumbai pertained to the assessment year 2008-09 where the assessment was made under section 147 r.w.s. 143(3) of the Act, resulting in the determination of income at Rs.3,06,159/-, which was disputed by the assessee. The primary issue raised was the validity of reopening the assessment by the Assessing Officer (AO). The assessee contended that the return of income was initially processed under section 143(1) of the Act and subsequently taken up for scrutiny, where all required details were furnished as per the questionnaire issued by the AO. The assessment was completed under section 143(3) by admitting the returned income. However, the AO sought to reopen the assessment on the grounds that the assessee should have declared a profit under section 44AF of the Act, which was contrary to the loss declared by the assessee. The AO issued a notice for reopening despite objections raised by the assessee, leading to a challenge before the CIT(A) and subsequently before the Tribunal.

The learned counsel for the assessee argued that the reopening of assessment was impermissible as it would amount to a review of the assessment order, citing relevant High Court judgments. It was emphasized that there was no fresh tangible material for reopening the assessment, and the facts were already on record during the initial assessment under section 143(3) of the Act. The counsel highlighted that the AO's failure to apply his mind previously should not result in the assessee suffering through initiation of proceedings under section 147, as it would be unjust to allow an authority exercising quasi-judicial functions to benefit from its own error.

After considering the rival submissions and perusing the record, the Tribunal held that the reopening of assessment within four years, in the absence of any fresh tangible material, was not justified. Following the cited High Court judgments, the Tribunal concluded that the reopening of assessment was legally flawed and allowed the appeal filed by the assessee company. The decision was pronounced in favor of the assessee on 4th June 2014.