2016 (8) TMI 1482 - AT - Income Tax

Reopening of assessment u/s 147 - reason to believe - reopening after four years - HELD THAT - Facts show that the assessee has disclosed all material facts at relevant places during original assessment proceedings u/s 143(3) of the Act. The AO himself asked for specific questions and full details were supplied by the assessee. AO examined these documents and framed the assessment only after proper application of mind. There was no failure on the part of the assessee to fully and truly disclose all the material facts. Thus reassessment is being sought by the AO on mere change of opinion and apparently on the basis of Audit Memo which is not permissible. No new tangible material has come to the knowledge of the AO so as to justify the reopening. See M/S. KELVINATOR OF INDIA LIMITED 2010 (1) TMI 11 - SUPREME COURT Hon ble apex Court in the case of CIT vs. Foramer France 2003 (1) TMI 101 - SC ORDER has clearly laid down the principle that where there is no failure on the part of the assessee to disclose material facts the reassessment proceedings after the expiry of four years is not possible in view of the provisions of Sec. 147 - Decided in favour of assessee.

Summary

Issues:
Reopening of assessment on technical grounds and merits.

Analysis:
1. The appeal was filed by the assessee for AY 2006-2007 challenging the CIT's order under sections 143(3) and 147 of the Income Tax Act, 1961. The assessee, a domestic company, filed its return declaring total income at Rs. 6,12,47,996, which was assessed at Rs. 6,29,41,275 after adjustments by the AO. The first appeal was partly allowed by the CIT(A)-14. Subsequently, a notice under Section 133(6) was issued, followed by a reopening notice under section 148 based on unexplained credits in the balance sheet. The AO rejected objections to reopening and reassessed the income at Rs. 24,83,91,284, which was confirmed by the CIT in the first appeal.

2. The AR challenged the reopening, arguing that all material facts were disclosed during the original assessment proceedings. The AO's power to reassess is limited to specific conditions, and there was no failure on the part of the assessee to disclose necessary facts. The AR cited judicial precedents to support the contention that reassessment based on a mere change of opinion is impermissible. The Tribunal noted that the reassessment was sought on the basis of an audit memo without any new tangible material justifying the reopening. Citing relevant case law, the Tribunal concluded that the reassessment proceedings were bad in law and set them aside, allowing the assessee's appeal.

3. The Tribunal highlighted that Section 147 allows reopening only if the assessee fails to file the return or disclose all material facts necessary for assessment. In this case, the AO sought to reopen the assessment based on unexamined trade payables and sundry creditors. However, the assessee had provided detailed responses during the original assessment, and the AO had examined the documents before framing the assessment. The Tribunal emphasized that there was no failure on the part of the assessee to disclose material facts, rendering the reassessment proceedings invalid. The Tribunal's decision was based on the principles laid down by the Supreme Court regarding the necessity of tangible material for reassessment and the prohibition on reassessment after four years in the absence of failure to disclose material facts.

4. The Tribunal's analysis focused on the legal requirements for reopening assessments beyond the prescribed period and the importance of disclosing all material facts during the original assessment. By emphasizing the limitations on the AO's power to reassess and the necessity of tangible material for reopening, the Tribunal concluded that the reassessment in this case was unjustified and set it aside, thereby allowing the assessee's appeal. The decision underscored the significance of adhering to legal provisions and established principles in conducting assessments and reassessments under the Income Tax Act, 1961.