2022 (1) TMI 1331 - AT - Income Tax

Reopening of assessment u/s 147 - addition on account of interest u/s 43D - Assessment reopened beyond the period of 4 years from the end of the relevant assessment year - HELD THAT - From the material on record, it is clearly indicated that the provision of NPA account was made in accordance with the direction of RBI. It is settled position of law that the primary duty of the assessee is only to disclose fully and truly all material facts necessary for the purpose of making the assessment and not draw the inferences. Thus, it cannot be said that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of making the assessment. Reliance in this regard can be placed on the decision of Kalpataru Ltd. 2021 (10) TMI 465 - BOMBAY HIGH COURT Thus, we are of the considered opinion that there is no satisfaction of the proviso to section 147 of the Act and the Assessing Officer was not entitled to reopen the assessment. Even otherwise, it is admitted that the basis of reopening the assessment for the assessment years 2010-11 and 2011-12, wherein, similar addition was made by the Assessing Officer which came to be deleted by the Tribunal vide order dated 26.10.2021 2021 (10) TMI 1204 - ITAT PUNE . Therefore, the very basis of the re-assessment proceedings does not stand, as once the foundation is removed, the superstructure falls (sublato fundmento credit opus). Decided in favour of assessee.

Summary

Issues:
Appeals against orders of Commissioner of Income Tax (Appeals) for assessment years 2007-08 and 2008-09.

Analysis:
1. The appeals were filed by the assessee against the orders of the Commissioner of Income Tax (Appeals) for the assessment years 2007-08 and 2008-09. The Tribunal proceeded to dispose of both appeals together due to identical facts and common issues.

2. For the assessment year 2007-08, the appellant, a public sector bank, filed its return of income initially showing a profit which was later revised to a loss. The Assessing Officer subsequently made additions, alleging wrong deductions under section 36(1)(viia) and violation of Rule 6EA of the Income Tax Rules. The Assessing Officer issued a notice for reassessment based on the alleged escaped income.

3. The appellant contended that there was no failure to disclose material facts for assessment, and the reassessment was beyond the permissible period. They argued that the issue had attained finality in previous assessment years, and the basis for reassessment no longer existed. The appellant also cited relevant legal precedents to support their case.

4. The Revenue argued that the failure to disclose the provision for NPA accounts constituted non-disclosure of material facts, justifying reassessment. They relied on subsequent assessment proceedings as tangible material for reassessment, citing relevant legal decisions to support their position.

5. The Tribunal held that the provision of NPA accounts was made in accordance with RBI directions and there was no failure on the part of the assessee to disclose material facts. They concluded that the Assessing Officer was not justified in initiating reassessment, as the basis for reassessment had been invalidated in previous years.

6. The Tribunal also noted that the issues and facts in the appeal for the assessment year 2008-09 were identical to those in 2007-08. Therefore, the decision in the earlier appeal applied mutatis mutandis to the appeal for 2008-09, resulting in both appeals being allowed.

7. In conclusion, the Tribunal allowed both appeals, overturning the orders of the lower authorities and ruling in favor of the assessee.