2022 (4) TMI 1500 - AT - Income Tax

Validity of reopening of assessment u/s 147 - Reason to believe - HELD THAT - The original assessment in this case was completed u/s 143(3) and the assessment year involved in A.Y. 2011-12. we find the AO in the instant case initiated reassessment proceedings by recording reasons on 29.03.2018. A perusal of the reasons clearly shows that there is absolutely no allegation whatsoever by the AO of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of assessment. Reassessment proceedings initiated by the AO and upheld by the ld. CIT(A) are not in accordance with law. Decided in favour of assessee.

Summary

Issues:
Validity of reassessment proceedings under Section 147 and addition of undisclosed income.

Analysis:
1. The appeal was filed against the order of the ld. CIT(A) relating to A.Y. 2011-12. The AO reopened the assessment under Section 147 due to clear evidence of transactions leading to an alleged income escapement.

2. The assessee challenged the validity of the reassessment proceedings before the ld. CIT(A) and raised objections, which were disposed of by the AO. Subsequently, the AO made an addition of Rs.39,76,192 as undisclosed income.

3. The assessee appealed to the Tribunal, questioning the validity of the reassessment proceedings and the addition made. The grounds of appeal included challenges to the notice validity, limitation of proceedings, change of opinion, and valuation discrepancies.

4. The assessee argued that the reassessment initiated after 4 years from the end of the relevant assessment year without any failure on their part to disclose material facts is void ab initio under the first proviso to Section 147. The AO's reasons for reassessment lacked any such allegation.

5. The Tribunal noted that the reasons recorded for reassessment did not indicate any failure by the assessee to disclose material facts. Citing relevant case law, the Tribunal held that the reassessment proceedings were not in accordance with the law and quashed them.

6. Relying on decisions of the Hon'ble Delhi High Court, the Tribunal concluded that the reassessment proceedings were invalid due to the absence of any specific allegations of non-disclosure of material facts by the assessee. Consequently, the reassessment proceedings were quashed, and the appeal in favor of the assessee was allowed.

This detailed analysis highlights the key aspects of the judgment, focusing on the validity of reassessment proceedings and the subsequent addition of undisclosed income, providing a comprehensive overview of the legal issues involved and the Tribunal's decision.