2015 (8) TMI 411 - AT - Income Tax

Validity of reopening of assessment - Held that - Assessing Officer had issued notice after a period of four years, that in the reasons recorded by him he has not directly or indirectly mentioned that there was failure on the part of the assessee, that proviso to section 147 of the Act specifically mandates that issue of notice after a period of four years should be based on the failure of the assessee. As there was no failure by the assessee to disclose material facts truly and fully, therefore, the notice issued by the Assessing Officer under section 148 of the Act was not valid. See Commissioner of Income-tax, Guwahati - 1 Versus Sonitpur Solves Ltd. 2013 (4) TMI 422 - GAUHATI HIGH COURT - Decided in favour of assessee.

Summary

Issues:
1. Validity of order passed under section 143(3)/147 of the Income-tax Act, 1961.
2. Bar on limitation for order passed by the Assessing Officer under section 143(3)/147.
3. Taxability of subsidies as capital receipts under State's Industrial Policy.
4. Legality of charging interest under section 234B without a specific order.

Analysis:

Issue 1:
The Appellate Tribunal considered the challenge against the order dated February 19, 2007, by the Commissioner of Income-tax (Appeals) regarding the legality and jurisdiction of the order passed under section 143(3)/147 of the Income-tax Act, 1961. The Tribunal analyzed the reasons recorded by the Assessing Officer for reopening the assessment and concluded that the notice issued after a period of four years without any failure on the part of the assessee to disclose material facts was not valid. Citing a judgment by the Gauhati High Court, the Tribunal held that the absence of failure to disclose fully and truly all material facts by the assessee rendered the notice invalid, thereby deciding in favor of the assessee on this ground.

Issue 2:
Regarding the limitation on the order passed by the Assessing Officer under section 143(3)/147, the Tribunal found that the notice issued after the expiration of four years without any failure on the part of the assessee to disclose material facts was barred by limitation. Relying on the judgment of the Gauhati High Court, the Tribunal concluded that the Assessing Officer lacked jurisdiction to reopen the assessment due to the absence of non-disclosure or omission by the assessee.

Issue 3:
The Tribunal addressed the question of whether subsidies received by the appellant as part of the State's Industrial Policy for setting up a new industry in Assam constituted capital receipts and were not liable to income tax. The Tribunal noted the specific subsidies received and the argument put forth by the appellant. However, due to the jurisdictional defect in the Assessing Officer's order, the Tribunal decided in favor of the assessee on the first ground, thereby not adjudicating the taxability of subsidies as capital receipts.

Issue 4:
Regarding the legality of charging interest under section 234B without a specific order, the Tribunal did not delve into this issue as it had already decided in favor of the assessee based on the jurisdictional defect in the Assessing Officer's order. Therefore, the Tribunal did not adjudicate on the other grounds raised by the assessee, ultimately allowing the appeal filed by the assessee.

In conclusion, the Appellate Tribunal, based on the jurisdictional defect in the Assessing Officer's order, decided in favor of the assessee on the validity and limitation of the order passed under section 143(3)/147. The Tribunal did not address the taxability of subsidies as capital receipts or the legality of charging interest under section 234B, as the jurisdictional issue was sufficient to allow the appeal.