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2015 (8) TMI 414 - AT - Income TaxReopening of the assessment u/ s 147 - amount wrongly claimed by the assessee being the amount written off which pertains to the development of software and forfeiture of registration charges of industrial land - CIT(A) quashed reopening - Held that - The present case is pertaining to AY 2003-04 wherein the AO issued notice u/s 148 of the Act on 4.9.2009 which is beyond four years as the AO could have started proceedings u/s 147 of the Act after the end of four years from the end of 2003-04 i.e. proceedings of reopening of assessment could have been initiated by way of issuing notice u/s 148 of the Act by 31.3.2008. Admittedly and undisputedly, the AO had issued notice on 4.9.2009 perhaps by invoking and applying first proviso to section 147 of the Act wherein the assessment can be reopened and notice u/s 147 of the Act can be issued only by reason of the failure on the part of assessee to disclose fully and truly all material facts pertaining to the issue which has been picked up by the AO for recording reasons for issuance of notice u/s 148 of the Act. In the present case, the AO has picked up the issue of written off amount of ₹ 23,43,179 pertaining to amount advanced to M/s Shonkh Technologies International Ltd. and the amount forfeited by Greater Noida Industrial Authority towards aborted project. As we have noted above, the assessee furnished entire details on this issue vide its submissions dated 26.2.2006 during the original assessment proceedings which have been placed by the assessee in its paper book pages 83 to 90. In this situation, the AO was not correct and justified in holding that the assessee did not truly and fully disclose all material facts relevant to the impugned issue of written off amount of ₹ 23,43,179/- during original assessment proceedings. Therefore, the case of the AO goes out of the ambit of first proviso to section 147 of the Act. CIT(A) was quite justified and correct in granting relief for the assessee by allowing legal contention and ground of the assessee against issuance of notice u/s 148 of the Act beyond the prescribed period of four years specifically when there was no failure on the part of assessee to disclose fully and truly material facts relevant to the issue of written off debts - Decided in favour of assessee.
Issues Involved:
1. Justification of reopening the assessment under Section 147 of the Income Tax Act, 1961. 2. Validity of the notice issued under Section 148 of the Act beyond the prescribed period of four years. Issue-wise Detailed Analysis: 1. Justification of reopening the assessment under Section 147 of the Income Tax Act, 1961: The revenue's appeal was based on whether the CIT(A) was justified in quashing the reopening of the assessment under Section 147. The revenue argued that under the amended provisions of Section 147, the power to reopen is much wider and can be exercised even after the assessee has disclosed fully and truly all material facts. The revenue cited the jurisdictional High Court decisions in the cases of Bawa Abhai Singh vs. CIT and Rakesh Aggarwal vs. ACIT to support their stance. The assessee, a private limited company engaged in manufacturing and marketing of electronic equipment, had its original assessment completed under Section 143(3). The reassessment proceedings were initiated on the grounds that the assessee wrongly claimed Rs. 23.43 lakhs as written off, which were capital in nature. The revenue contended that the assessee failed to add back these amounts into the computation of income, thus leading to income escaping assessment. The assessee objected to the reopening, arguing that all material facts were disclosed during the original assessment. The CIT(A) allowed the appeal on legal grounds, stating there was no failure on the part of the assessee to disclose fully and truly all material facts. The Tribunal upheld this view, noting that the assessee had indeed provided all relevant details during the original assessment proceedings. 2. Validity of the notice issued under Section 148 of the Act beyond the prescribed period of four years: The Tribunal noted that the notice under Section 148 was issued on 4.9.2009, beyond the four-year period allowed under the first proviso to Section 147. The proviso stipulates that no action under Section 147 shall be taken after the expiry of four years from the end of the relevant assessment year unless the income chargeable to tax has escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The CIT(A) observed that the notice was issued beyond the permissible period and there was no failure on the part of the assessee to disclose material facts. The Tribunal agreed, stating that the assessee had disclosed all relevant details regarding the written-off amounts during the original assessment. The Tribunal referenced the Delhi High Court's judgment in Dalmia Pvt. Ltd. vs. CIT, which held that failure to disclose material facts must be evident for reopening beyond four years. The Tribunal concluded that the CIT(A) was correct in holding that the notice under Section 148 was issued beyond the prescribed period and without any failure on the part of the assessee to disclose material facts. Consequently, the Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to quash the reassessment proceedings. Conclusion: The Tribunal upheld the CIT(A)'s decision, concluding that the reopening of the assessment under Section 147 was not justified as the notice under Section 148 was issued beyond the permissible period without any failure on the part of the assessee to disclose fully and truly all material facts. The appeal of the revenue was dismissed.
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