2016 (4) TMI 78 - AT - Income Tax

Validity of reopening of assessment - Wrong claim of bad debt and foreign exchange gain - Held that - Re-assessment proceedings u/s.148 in its case are barred by limitation due to the proviso of sec.147 of I.T.Act. It is noted that though the AO has claimed that the income has escaped assessment during the year on account of wrong claim of bad debt and foreign exchange gain, but it is worth noting that during the original assessment the then A.O. has specifically raised both the issues in question in the notice dated 14.12.2007 and in compliance of the said notice in this regard, vide letter dtd. 20/12/2007 details/clarification on both the issues were provided to the AO by the appellant. Therefore, under these circumstances it cannot be held that in the original assessment the A.O has not applied his mind and he has not taken a conscious decision on this particular matter. In the instant case it is noted that both the issues were considered by the A.O. in the original assessment. Therefore, under these circumstances it appears that there has been no omission/failure on the part of the appellant to disclose any material fact. In the reasons recorded by the A.O. also it is not mentioned that the appellant has not disclosed any material facts. - Decided in favour of assessee

Summary

Issues:
Challenge to the validity of reopening assessment for AY 2005-06.

Analysis:
The appeal pertains to the Revenue challenging the decision of the ld.CIT(A)-9 regarding the validity of the reopening of assessment for the assessment year 2005-06. The assessing officer had reopened the assessment after the expiry of four years from the end of the assessment year to disallow certain claims that were allowed in the original assessment proceedings. The assessee contended that there was no failure to furnish material information as specific queries were raised by the assessing officer during the original assessment, and the assessee duly replied to them. The first proviso to sec. 147 of the Act was invoked by the assessee to argue that the reopening of assessment was bad in law. The Ld CIT(A) agreed with the assessee's contentions and quashed the reassessment order, leading to the Revenue filing an appeal.

The Tribunal noted that the original assessment was completed under sec. 143(3) of the Act, and the assessing officer had indeed raised specific queries regarding the disallowances in question during the original assessment. Since the assessee had provided replies to these queries, it was held that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Therefore, it was concluded that the first proviso to sec. 147 of the Act was not satisfied, indicating that the reopening of assessment was based on a change of opinion, which is impermissible. The decision of the Ld CIT(A) was upheld as it correctly addressed the issue, emphasizing that the reassessment proceedings were barred by limitation under the proviso of sec. 147 of the Income Tax Act.

The Ld CIT(A) highlighted that during the original assessment, the assessing officer had specifically raised the issues that were later the subject of the reassessment. The appellant had provided details and clarifications on these issues in response to the assessing officer's queries. It was emphasized that the assessing officer had applied his mind during the original assessment and had taken a conscious decision on the matters in question. As there was no omission or failure on the part of the appellant to disclose material facts, the reassessment after the lapse of four years from the end of the assessment year was deemed unjustified. The Tribunal concurred with the Ld CIT(A)'s decision to quash the reassessment proceedings, rendering the grounds relating to the additions moot.

In conclusion, the Tribunal found no infirmity in the decision of the Ld CIT(A) and upheld the same, resulting in the dismissal of the appeal filed by the Revenue challenging the validity of the reopening of assessment for the assessment year 2005-06.