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2022 (9) TMI 1421 - AT - Income TaxReopening of assessment u/s 147 - reasons to believe - recording reasons beyond four years - Addition u/s 68 - material seized during the search and seizure operation on Shri S.K. Jain and his brothers - HELD THAT - As in the judgement of the jurisdictional High Court of Delhi in the case of BPTP Ltd 2020 (1) TMI 56 - DELHI HIGH COURT as been held that the recorded reasons except of using the expression failure on the part of the assessee to disclose fully and truly all material facts do not specify as to what is the nature of default or failure on the part of the assessee. In the cases when the AO intends to initiate reassessment proceedings beyond a period of four years, but, before expiry of six years from the date of issuance of notice, then, the proviso to section 147 of the Act comes into play and the AO is bound to follow the same as per the mandate of the provision. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose the material facts fully and truly. This is a necessary condition for overcoming the rider set up by the proviso to section 147 of the Act. If this condition precedent is not satisfied, the bar would operate and no action u/s 147 of the Act can be initiated against the assessee for reassessment proceedings. Reasons supplied to the Petitioners, does not contain any such allegation. Consequently, one of the conditions precedent for removing the rider against taking action u/s 147 of the Act after a lapse of four years remains unfulfilled and unsatisfied and in absence of any allegation in the reasons recorded that the escapement of income had occurred by the reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year, any action taken by the AO u/s 147 of the Act beyond the period of four years would be without assumption of valid jurisdiction. Therefore, respectfully following the proposition rendered in the case of BPTP Ltd. ( 2020 (1) TMI 56 - DELHI HIGH COURT ), in the case of Haryana Acrylic Manufacturing Company Ltd. 2008 (11) TMI 2 - DELHI HIGH COURT and Anand Developers ( 2020 (2) TMI 995 - BOMBAY HIGH COURT ), we hold that the notice u/s 148 of the Act based on the reasons recorded and the consequent reassessment are without jurisdiction as no action u/s 147 of the Act could be taken beyond the period four years in absence of compliance of proviso to section 147 of the Act - Decided in favour of assessee.
Issues Involved:
1. Validity of reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961. 2. Compliance with the proviso to Section 147 of the Act. 3. Validity of the notice issued under Section 148 of the Act. 4. Allegation of non-disclosure of material facts by the assessee. 5. Validity of the reassessment order dated 30.12.2016. 6. Grounds raised by the Revenue regarding deletion of addition under Section 68 of the Act. Detailed Analysis: 1. Validity of Reassessment Proceedings Initiated Under Section 147: The Assessee contended that the reassessment proceedings were invalid as the notice under Section 148 was not issued within the stipulated period prescribed under Section 149(1)(b) read with the proviso to Section 147. The Tribunal examined the reasons recorded by the Assessing Officer (AO) and found that the AO did not specify which material facts were not disclosed by the assessee, leading to the escapement of income. The Tribunal noted that the mere bald allegation by the AO that the assessee did not disclose fully and truly all material facts is insufficient to meet the requirement of the proviso to Section 147. Therefore, the reassessment proceedings were held to be invalid. 2. Compliance with the Proviso to Section 147: The Tribunal observed that for the AO to assume jurisdiction under Section 147 beyond four years, it is necessary that the income chargeable to tax has escaped assessment due to the failure on the part of the assessee to disclose all material facts. The Tribunal found that the AO did not provide any specific details of the alleged non-disclosure by the assessee. Consequently, the condition precedent for invoking Section 147 was not satisfied, and the reassessment proceedings were quashed. 3. Validity of the Notice Issued Under Section 148: The Tribunal held that the notice issued under Section 148 was invalid as it was based on reasons recorded by the AO, which did not fulfill the requirements of the proviso to Section 147. The Tribunal emphasized that the AO must provide specific details of the material facts that were not disclosed by the assessee, which was not done in this case. 4. Allegation of Non-disclosure of Material Facts by the Assessee: The Tribunal found that the AO's allegation of non-disclosure of material facts by the assessee was baseless. The Tribunal noted that the assessee had disclosed all relevant details, including the impugned share subscription money, during the original assessment proceedings. The Tribunal relied on the findings of the CIT(A), which stated that the appellant had made full disclosure of all material facts. 5. Validity of the Reassessment Order Dated 30.12.2016: Since the Tribunal quashed the initiation of reassessment proceedings and the notice under Section 148, the consequent reassessment order dated 30.12.2016 was also held to be invalid and without jurisdiction. The Tribunal emphasized that the reassessment order was passed without assuming valid jurisdiction, rendering it bad in law. 6. Grounds Raised by the Revenue Regarding Deletion of Addition Under Section 68: The Tribunal dismissed the grounds raised by the Revenue as infructuous, given that the reassessment proceedings were quashed. The Tribunal did not adjudicate on the merits of the addition under Section 68, as the reassessment order itself was held to be invalid. Conclusion: The Cross Objection filed by the assessee was allowed, and the initiation of reassessment proceedings under Section 147, the notice under Section 148, and the reassessment order dated 30.12.2016 were quashed as invalid and without jurisdiction. Consequently, the appeal filed by the Revenue was dismissed as infructuous. The order was pronounced in the open court on 20.10.2022.
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