2018 (11) TMI 1737 - AT - Income Tax

Reopening of assessment u/s 147 - reopening beyond 4 years - re-opening on the basis of audit objection - HELD THAT - There is no new material based on which the Assessing Officer has confirmed the information that income subject to tax has escaped assessment. There is no whisper in the reasons recorded that there was failure on part of the assessee to truly and fully disclose all the material facts required for assessment. When there is no such mention the Hon ble Delhi High Court in the case of M/s. Haryana Archylic Manufacturing Company vs. CIT 2008 (11) TMI 2 - DELHI HIGH COURT has held to be the re-opening to be bad in law. - Decided in favour of assessee.

Summary

Issues involved:
1. Validity of reopening assessment beyond 4 years under Section 147 of the Income Tax Act, 1961.
2. Reopening assessment based on audit objection.
3. Failure to disclose fully and truly all material facts necessary for assessment.

Validity of Reopening Assessment Beyond 4 Years:
The appeal was filed by the revenue against the order of the Learned Commissioner of Income Tax (Appeals)-4, Kolkata, regarding Assessment Year 2006-07. The primary issue was the validity of the notice issued under Section 148 of the Income Tax Act. The proviso to Section 147 restrains the Assessing Officer (AO) from initiating reassessment where assessment under Section 143(3) has already taken place. In this case, the notice under Section 148 was issued more than 4 years after the end of the relevant assessment year. The reassessment was sought based on a change in opinion on the same set of facts, which was held to be impermissible by the judgment of the Hon'ble Apex court in the case of CIT vs Kelvinator India Ltd. The reassessment was done on an audit query, not due to a failure on the part of the assessee to disclose all material facts. Therefore, the reassessment was held to be barred by limitation and was quashed.

Reopening Assessment Based on Audit Objection:
The Assessing Officer initiated the reopening of assessment based on an audit query without any failure on the part of the assessee to disclose all material facts. The Hon'ble Delhi High Court has held that such reopening without evidence of failure to disclose all material facts is bad in law. In this case, there was no new material provided to support the claim that income subject to tax had escaped assessment. Consequently, the order of the First Appellate Authority quashing the reopening was upheld, and the appeal of the revenue was dismissed.

Failure to Disclose Fully and Truly All Material Facts:
The crux of the issue revolved around the failure of the assessee to disclose fully and truly all material facts necessary for assessment. The reasons recorded for reopening did not indicate any failure on the part of the assessee to disclose such facts. In the absence of such evidence, the reassessment was deemed to be invalid. The judgment highlighted the importance of the AO having a valid reason to believe that income had escaped assessment, which was not established in this case. As a result, the reassessment was quashed, and the appeal of the assessee was allowed.

In conclusion, the judgment focused on the procedural and substantive aspects of reopening assessments beyond the statutory limit of 4 years, emphasizing the necessity for valid reasons and evidence to support such actions to prevent undue hardship to taxpayers.