2014 (8) TMI 764 - AT - Income Tax

Reopening of assessment u/s 147 Full and true disclosure not made by assessee Held that - The FAA had noticed certain discrepancies in the reassessment proceedings, so, he had directed the AO to send his comments - the AO did not comply with his directions and in spite of getting more than one opportunity he did not submit his comments to the FAA, so, that he could take an informed decision - the FAA was left with no alternative but to decide the matter on merits - From January to July 2012, the AO did not send his report to a judicial authority for the reasons best known to him only - FAA is very senior officer of the department and entrusted with a responsibility of carrying out judicial work Non-cooperation with him is not only beyond our comprehension but also against the departmental discipline - The matter does not end here only. When the FAA decides the appeal on merits the same AO challenges it alleging that the FAA has erred - The chronology of events prove in unequivocal terms that if somebody had erred it was the AO and not the FAA - He has tried to improve upon his case lately in form of grounds of appeal filed before us the order of the FAA should have been accepted gracefully and the administrative approval should not have been given to file the second appeal - thus, the order of the FAA does not suffer from any legal or factual infirmity Decided against revenue.

Summary

Issues Involved:
1. Deletion of additions by CIT(A).
2. Quashing/annulling of the assessment order under sections 143(3) and 147.
3. Non-disclosure of material facts by the assessee.
4. Requirement for reasons of reopening to be supplied along with notice under section 148.
5. Validity of reassessment proceedings and reassessment order.

Issue-wise Detailed Analysis:

1. Deletion of Additions by CIT(A):
The Assessing Officer (AO) challenged the deletion of additions amounting to Rs. 1,13,07,046 and Rs. 60,11,835 by the CIT(A). The AO had made these additions on the grounds that there was a discrepancy between the income as per TDS certificates and the income reported in the Profit & Loss account, and that the assessee had claimed excessive expenditure, resulting in a double deduction.

2. Quashing/Annulling of the Assessment Order under Sections 143(3) and 147:
The CIT(A) quashed the reassessment order passed under sections 143(3) and 147, stating that the AO had not followed the legal provisions required for reopening the assessment. Specifically, the assessment was reopened beyond four years from the end of the relevant assessment year without demonstrating that the income had escaped assessment due to the assessee's failure to disclose fully and truly all material facts.

3. Non-disclosure of Material Facts by the Assessee:
The CIT(A) found that the AO did not establish how the assessee failed to disclose material facts necessary for the assessment. The AO's reasons for reopening the assessment did not indicate any failure on the part of the assessee to disclose necessary material facts, which is a jurisdictional requirement under the proviso to section 147.

4. Requirement for Reasons of Reopening to be Supplied Along with Notice under Section 148:
The CIT(A) held that the reasons for reopening should have been supplied along with the notice under section 148. The AO failed to provide such reasons, and it was noted that the assessee never requested the reasons for issuing the notice under section 148.

5. Validity of Reassessment Proceedings and Reassessment Order:
The reassessment proceedings were initiated based on an audit objection, and the AO did not demonstrate any failure by the assessee to disclose material facts. The CIT(A) noted that the AO had not obtained the necessary prior approval from the Joint Commissioner or the Chief Commissioner/Commissioner as required under sections 151(1) and 151(2). This lack of compliance with statutory requirements rendered the reassessment proceedings and the reassessment order invalid.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to quash the reassessment order, confirming that the reopening of the assessment was invalid due to the AO's failure to demonstrate the assessee's non-disclosure of material facts and lack of necessary approvals. The appeal filed by the AO was dismissed, and the order of the CIT(A) was confirmed. The Tribunal emphasized the importance of adhering to statutory requirements and proper jurisdictional conditions for reopening assessments.