2015 (2) TMI 330 - HC - Income Tax

Reopening of the assessment - Tribunal held reopening within the period of limitation - addition towards unexplained cash credit - Held that - In the present case, the relevant assessment year is 1994-95 and the limitation period of four year expires on 31.03.1999. In the present case, the impugned notice is issued on 07.03.2000 which means that the notice is issued after the period of limitation. From the perusal of assessment order as well as assessment records there seems to be no evidence whatsoever to conclusively prove that the cash credits of the assessees were not genuine. The entire information available at the time of reassessment was also available at the time of original assessment as well and the Assessing Officer while completing the original return had accepted the cash credits as genuine in the assessment framed u/s 143(3).There is nothing on record to indicate any omission on the part of the assessee in fulfilling any obligation in law. Whether the Assessing Officer while framing original assessment had failed to work out the tax liability correctly or not, the assessee cannot be charged for any omission. In case the assessee had laid a claim to a particular amount, it was the job of the Assessing Officer to correctly compute the tax liability. Merely making a claim cannot be stated to be non-disclosure of material facts so as to vest in the Assessing Officer jurisdiction under section 147 of the Act. See Parashuram Pottery Works Co. Ltd. vs. Income-tax Officer reported in 1976 (11) TMI 1 - SUPREME Court and Cadila Healthcare Ltd vs. Deputy Commissioner of Income-tax reported in 2010 (5) TMI 570 - Gujarat High Court . - Decided in favour of the assessees

Issues Involved:
1. Whether the Tribunal was justified in holding that the reopening of the assessment was within the period of limitation?

Issue-wise Detailed Analysis:

1. Reopening of Assessment within the Period of Limitation:

The primary issue in this case is whether the Tribunal was justified in holding that the reopening of the assessment was within the period of limitation. The assessees filed their income tax returns for the assessment year 1994-95. The assessment was later reopened under section 147 of the Income Tax Act, 1961, for making additions towards alleged unexplained cash credits under section 68 of the Act. Notices under section 148 were issued on 07.03.2000, which the assessees contested, arguing that the reopening was beyond the four-year limitation period stipulated under the Act.

The Assessing Officer disregarded the objections and made additions towards unexplained cash credits. The assessees appealed to the CIT(A), who concluded that the reopening was barred by limitation due to the proviso to section 147. The revenue then appealed to the Tribunal, which reversed the CIT(A)'s findings and upheld the reopening of the assessment and the additions made under section 68.

2. Failure to Disclose Material Facts:

The Tribunal's decision was challenged on the grounds that there was no failure on the part of the assessees to disclose fully and truly all material facts necessary for the assessment. The Tribunal was argued to have ignored certain factual aspects and settled legal positions, leading to a vitiated finding. The assessees relied on the Apex Court's decision in Parashuram Pottery Works Co. Ltd. vs. Income-tax Officer and the Gujarat High Court's decision in Cadila Healthcare Ltd vs. Deputy Commissioner of Income-tax.

3. Legal Provisions and Precedents:

Section 147 of the Act allows the reopening of assessments if the Assessing Officer has reason to believe that income has escaped assessment. However, the first proviso to section 147 restricts reopening after four years unless there is a failure to disclose fully and truly all material facts necessary for the assessment. In this case, the relevant assessment year was 1994-95, and the limitation period expired on 31.03.1999. The notice issued on 07.03.2000 was beyond this period. The court examined whether there was any failure on the part of the assessees to disclose material facts.

4. Examination of Evidence:

Upon reviewing the assessment order and records, the court found no evidence proving that the cash credits were not genuine. The information available during the reassessment was also available during the original assessment, where the Assessing Officer had accepted the cash credits as genuine under section 143(3).

5. Supporting Judgments:

The court referenced the Supreme Court's decision in Parshuram Pottery, which emphasized that assessments cannot be reopened after four years unless there is a failure to disclose material facts. Similarly, in Cadila Healthcare, the court held that mere production of account books does not amount to disclosure and that the Assessing Officer's subsequent change of opinion does not justify reopening the assessment.

6. Distinguishing Precedents:

The revenue relied on the Supreme Court's decision in Phool Chand Bajrang Lal, which allows reopening if a party makes a false statement during the original assessment. However, the court found this case inapplicable as there was no evidence of false statements by the assessees. The lenders did not name the assessees in their statements, and there was no failure to disclose material facts.

Conclusion:

The court concluded that the Tribunal erred in holding that the assessees had concealed income, and thus, penalty proceedings were not justified. The Tribunal's order was quashed, and the CIT(A)'s order was restored. The court answered the question in favor of the assessees, ruling that the reopening of the assessment was not within the period of limitation. Consequently, the impugned notices were set aside, and the appeals were allowed.

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