2015 (10) TMI 1610 - AT - Income Tax

Validity of reopening of assessment - Held that - As evident from the reasons that there is no imputation of any failure by the assessee to disclose the relevant material for the purpose of assessment. Under the proviso to section 147 for a re-opening to be valid beyond four years from the end of the relevant assessment year there is a statutory requirement, that the failure on the part of the assessee to fully and truly disclose material facts must be ascertainable before invoking the section. In this case, as it is evident from the notes to the accounts, computation of income, form 29B, available with the AO while completing the assessment u/s 143(3) and while issuing the notice u/s 154 dated 06/11/2008, all the material facts were available with the AO. The reopening is therefore in contravention of the first proviso to section 147. Since there is no new material brought on record by the AO nor any failure on the part of the assessee to disclose primary or material facts the reopening cannot be considered valid. - Decided in favour of assessee.

Summary

Issues:
Validity of reopening of assessment under MAT provisions for the assessment year 2005-06.

Analysis:
The appeal pertains to the revenue challenging the order of the CIT(A)-III, Bangalore, which deemed the reopening of assessment invalid and consequently deleted the additional assessment for the year 2005-06. The Assessing Officer had observed under-assessment of income under Minimum Alternate Tax (MAT) provisions and issued a notice u/s 148 for reopening the assessment. The AO disallowed the claim of reduction of interest on term loan waived by a financial institution from the book profits u/s 115JB of the Act during the reassessment proceedings u/s 147. The CIT(A) held the reopening to be invalid as it was done after more than 4 years from the end of the relevant assessment year, emphasizing that the assessee had disclosed all material facts during the original assessment u/s 143(3). The appellant contended that the reopening was impermissible without a failure on the part of the assessee to disclose all necessary facts for assessment, which was not the case here.

The CIT(A) highlighted that all relevant facts regarding the interest waived by financial institutions were disclosed by the assessee during the original assessment proceedings. The AO's reasons for reopening did not indicate any failure on the part of the assessee to fully and truly disclose material facts necessary for assessment. The CIT(A) noted that the AO's action seemed to be a change of opinion rather than a valid reason to reopen the assessment. The AO's reasons for reopening did not establish any failure on the part of the assessee to disclose primary or material facts, as all relevant details were available in the financial statements and computations submitted to the AO. The reopening was found to be in violation of the statutory requirement under the proviso to section 147, as there was no new material brought on record by the AO to warrant reopening beyond the stipulated time frame.

The Appellate Tribunal concurred with the CIT(A)'s findings, stating that the revenue failed to provide any evidence to rebut the conclusion that the reopening of assessment was invalid. Consequently, the appeal by the revenue was dismissed, upholding the order of the CIT(A) deeming the reopening of assessment and consequential additions as invalid for the assessment year 2005-06.

This detailed analysis emphasizes the importance of the assessee's obligation to disclose all relevant material facts during the original assessment to prevent arbitrary reopening of assessments beyond the prescribed time limit without valid grounds. The judgment underscores the statutory requirements and the need for the AO to have a valid reason to believe that income has escaped assessment before reopening proceedings can be initiated.