2014 (7) TMI 307 - AT - Income Tax

Reopening of assessment u/s 147 of the Act Verification and addition of profit u/s 145A of the Act Held that - The assessment has been completed u/s 143(3) after detail scrutiny and examination of records, which is evident from the fact that the AO had made additions on various counts AO had rejected the assessee s contention and has made the addition of ₹ 78,34,362 - such an assessment has been sought to be re-opened after the expiry of four years from the end of the relevant assessment year, which is clearly hit by the first proviso to section 147 - on a perusal of the reasons recorded , it is seen that nowhere the AO has ascribed any failure on the part of the assessee to disclose truly and fully all material facts necessary for the assessment - This is a condition precedent for acquiring jurisdiction u/s 147, in the case where assessments have been completed u/s 143(3). Where the assessment has been made u/s 143(3) or u/s 147, then no action can be taken for re-opening the case u/s 147, after the expiry of four years from the end of the relevant assessment year - The only exception Carved out from such a limitation is that, income chargeable to tax has escaped assessment by the reason of the failure on the part of the assessee to furnish the return u/s 139 or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment - The reasons recorded should clearly spell out what is the failure on the part of the assessee and it should provide direct link with the material brought on record and the income which has escaped assessment on the reason of failure on the part of the assessee. The limitation provided under the first proviso to section 147, is absolute and there is no escapement of limitation of four years unless the case falls within the saving clause as provided therein - The re-opening cannot be justified on the ground that notice u/s 148, has been approved by a higher authority, as held by the Commissioner (Appeals) - The jurisdiction can be acquired under the provision of the statute and not by sanction of any superior authority - the reasons recorded , neither there is any whisper about the failure on the part of the assessee nor there is any material to show on record that there has been any failure on the part of the assessee thus, the order of the CIT(A) is set aside Decided in favour of Assessee.

Summary

Issues:
Validity of re-opening assessment under section 147 beyond four years from the end of the relevant assessment year.
Merits of the addition made by the Assessing Officer under section 147.

Analysis:

Issue 1: Validity of re-opening assessment under section 147 beyond four years from the end of the relevant assessment year:
The appeal challenged the order passed by the Commissioner (Appeals)-VI, Mumbai, regarding the quantum of assessment under section 143(3) r/w section 147 of the Income Tax Act, 1961 for the assessment year 2002-03. The Assessing Officer sought to re-open the assessment based on discrepancies in the tax audit report, specifically related to a deviation in profit under section 145A. The notice for re-opening was issued after four years from the end of the relevant assessment year. The assessee contended that all necessary information was disclosed in the tax audit report and financial statements, and the original assessment was done thoroughly. The Assessing Officer had made additions and discussed various issues in detail during the original assessment. The Tribunal found that the re-opening beyond four years was not justified as there was no failure on the part of the assessee to disclose material facts. The reasons recorded for re-opening did not establish any failure on the part of the assessee, and the jurisdiction under section 147 could not be acquired without such failure. The Tribunal relied on legal precedents and set aside the re-opening, declaring it null and void.

Issue 2: Merits of the addition made by the Assessing Officer under section 147:
Since the Tribunal held the re-opening under section 147 as invalid, the discussion on the merits of the addition made by the Assessing Officer became academic and was not adjudicated upon. The Tribunal emphasized that since the re-opening itself was declared null and void, there was no need to delve into the specifics of the addition made by the Assessing Officer. Therefore, the Tribunal allowed the assessee's appeal based on the invalidity of the re-opening under section 147.

In conclusion, the Tribunal ruled in favor of the assessee, setting aside the re-opening under section 147 due to the absence of failure on the part of the assessee to disclose material facts, making the notice invalid. As a result, the discussion on the merits of the addition by the Assessing Officer was deemed unnecessary and not addressed.