2007 (6) TMI 143 - HC - Income Tax

Reassessment Tribunal disallowed the reassessment proceeding initiated by the AO on the ground that there is no failure on the part of assessee to disclose material facts necessary for assessment hence reassessment proceeding beyond four years not allowed and also upheld by HC

Summary

Issues:
1. Validity of reassessment under Section 143(3) r/w 147 of the Income Tax Act, 1961.

Analysis:
The case involves an appeal filed by the Revenue against the order of the Income Tax Appellate Tribunal regarding the reassessment made under Section 143(3) r/w 147 of the Income Tax Act. The Tribunal upheld the order of the Commissioner of Income-tax (Appeals) who found that the reopening of the assessment was not in accordance with the law. The issue at hand was whether the reassessment made under Section 143(3) r/w 147 was valid. The Revenue contended that the deduction claimed by the assessee was excessive, justifying the reassessment proceedings. However, the Tribunal and the first appellate authority relied on the Supreme Court judgment in the case of C.I.T. Vs. Foramer France [2003] 264 ITR 566, which emphasized the requirement of the assessee's failure to disclose material facts for reassessment beyond four years from the end of the relevant assessment year.

In this case, the notice under Section 148 was issued after four years from the end of the assessment year, and both the Tribunal and the first appellate authority followed the legal provisions outlined in the Supreme Court judgment. The Court discussed the changes brought by the Direct Tax Laws (Amendment) Act, 1987, which eliminated the distinction between reassessment within four years and beyond four years. The proviso to Section 147 sets a limitation of four years for reassessment unless there is a failure on the part of the assessee to disclose material facts necessary for assessment. The Tribunal found that the reassessment was initiated after four years without any new material or information, and there was no failure on the part of the assessee to disclose material facts, thus upholding the order of the Commissioner of Income-tax (Appeals).

The Court reiterated that for reassessment beyond four years, there must be a failure on the part of the assessee to disclose fully and truly all material facts. Since there was no such failure in this case and all material facts were available during the original assessment, the Tribunal's decision aligns with legal principles established by previous judgments. Consequently, the Court found no error or legal infirmity in the Tribunal's order, leading to the dismissal of the appeals filed by the Revenue. No substantial questions of law were identified for consideration, and the case was closed without costs.