2015 (10) TMI 2112 - AT - Income Tax

Reopening of assessment - undisclosed change in shareholding pattern - claim of set off of brought forward business loss and depreciation denied - Held that - A perusal of the return of income in particular exhibit-5 shows that the details of share holders PAN was given by the assessee under the head other information. Under the head Other information details of equity shares are provided and statement of set off of unabsorbed losses and allowances brought forward from earlier years is given. As mentioned elsewhere pertaining to details in relation to the change in shareholding pattern was specifically explained as mentioned at para 6.5 of the order. Thus, the very material fact was available at the time of the original assessment proceedings. Therefore, the second condition is also fulfilled by the assessee as it has made available the material facts necessary for making the assessment. In the light of the reasons for reopening of the assessment, in our considered opinion, there is no reference to any failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. There is not even a whisper of failure by the assessee to disclose material facts. Therefore, there is no valid ground for reopening the assessment. We, accordingly, set aside the notice issued u/s. 148 of the Act and also the impugned assessment order. - Decided in favour of assessee.

Summary

Issues:
Challenge to jurisdiction of Assessing Officer for issuing notice u/s. 148 of the Act; Reopening of assessment after 4 years; Failure to disclose all material facts necessary for assessment.

Analysis:
1. The appellant challenged the jurisdiction of the Assessing Officer (AO) for issuing a notice u/s. 148 of the Act, claiming it to be bad in law. The AO reopened the assessment after finding discrepancies in the set off of losses due to changes in share capital and holding pattern. The appellant argued that the reopening was a change of opinion and objected to it on grounds of being time-barred.

2. The AO provided reasons for reopening the assessment, citing non-allowance of set off of losses due to Sec. 79 provisions. The appellant contended that all material facts were disclosed during the original assessment, thus reopening was unwarranted. The appellant's objections were dismissed, leading to an appeal before the CIT(A) and subsequently to the ITAT Mumbai.

3. The ITAT Mumbai analyzed the provisions of Sec. 147 and the first proviso, emphasizing the requirement of failure to disclose material facts for reopening assessments after 4 years. The ITAT scrutinized the documents submitted by the appellant, including shareholding details and responses to AO's queries, concluding that there was no failure on the part of the appellant to fully disclose necessary facts for assessment.

4. Citing precedents like Plus Paper Food Pac Ltd. Vs ITO and CIT Vs Jet Speed Audio Pvt. Ltd., the ITAT stressed that the power to reopen assessments does not allow for correcting earlier mistakes unless there is a failure to disclose material facts. The ITAT found no such failure in the present case and set aside the notice u/s. 148 and the impugned assessment order, allowing the appeal filed by the assessee.

5. In the final judgment, the ITAT ruled in favor of the appellant, emphasizing the importance of full and true disclosure of material facts by the assessee for assessment purposes. The ITAT's decision highlighted the necessity of meeting legal requirements for reopening assessments and the implications of failing to disclose material facts adequately.

This comprehensive analysis of the legal judgment provides a detailed breakdown of the issues involved, the arguments presented by the parties, and the ITAT's decision based on the interpretation of relevant legal provisions and precedents.