2019 (6) TMI 1485 - AT - Income Tax

Reopening of assessment u/s 147 - notice u/s.148 issued after expiry of 4 years - loan liability of the assessee has been ceased and this remission in the loan liability ought not to be treated a capital receipt rather it is taxable u/s. 41(1) - HELD THAT - Proviso appended to section 147 creates an embargo on the powers of assessing officer to reopen an assessment where scrutiny assessment has been passed and four years have expired from the end of the relevant assessment year. AO cannot reopen assessment unless it is established that on account of failure of assessee to disclose all material facts fully and truly income has escaped assessment. A perusal of the reasons would reveal that assessing officer has nowhere recorded that on account of failure of the assessee to disclose all material facts fully and truly, income has escaped assessment. Unable to lay his hands on any new information, he has only re-appreciated the information already possessed by him and considered in the scrutiny assessment. There is no allegation against the assessee for withholding of any information. In such situation, the reopening of assessment is not justifiable - Decided in favour of assessee.

Summary

Issues:
1. Reopening of assessment
2. Addition of ? 159,46,05,271/-

Reopening of assessment:
The appeal was filed against the order of the ld. CIT(A) for the assessment year 2006-07, focusing on two main issues. The assessing officer reopened the assessment post the original order passed under section 143(3). The counsel for the assessee argued that the notice under section 148 was issued after the expiry of four years from the end of the relevant assessment year, contending that all material facts were disclosed during the original assessment. The assessing officer's reasons for reopening were scrutinized, highlighting that there was no evidence of the assessee failing to disclose material facts. The assessing officer had not presented any new information but only reevaluated existing data. The tribunal concluded that without evidence of non-disclosure leading to income escaping assessment, the reopening was not justified, leading to the appeal being allowed and the reassessment order being quashed.

Addition of ? 159,46,05,271/-:
The dispute also revolved around the addition of ? 159,46,05,271/- to the assessee's income. The contention was whether the remission of the loan liability should be treated as a capital receipt or taxable under section 41(1). The revenue authorities argued that the loan liability cessation should be taxed under section 41(1), justifying the assessment reopening. However, the tribunal analyzed the facts and reasons for reopening, emphasizing that the assessing officer failed to establish that the income had escaped assessment due to the assessee's failure to disclose material facts. As there was no evidence of non-disclosure, the tribunal held that the reassessment was unwarranted.

The tribunal, therefore, allowed the appeal, quashed the reassessment order, and pronounced the judgment on 4th June 2019.