2016 (5) TMI 18 - HC - Income Tax

Reopening of assessment - At the time of scrutiny assessment u/s 143(3) AO was conscious of the fact that deduction had been claimed under Section 80-O - Revenue contended that copy of agreement was not supplied during the original assessment proceedings - Held that - Significantly in the affidavit filed by Respondent No. 1 he does not state that the AO had the files for the concerned AYs before him when he issued the notice. He in fact candidly states in his affidavit that the reasons recorded are based on the information received from the office of the CIT(A) pertaining to the appeals for AYs 1990-91 and 1991-92. He also admits that the file for AY 1993-94 is not traceable. In other words the Revenue has been unable to demonstrate that for AYs 1992-93 and 1993-94 the agreement with Sumitomo Corporation was not produced by the Assessee. - The fundamental condition for resorting to Section 147 in a case where reopening is sought to be done after expiry of four years after the expiry of the relevant assessment year in which the assessment orders were passed is not fulfilled in the present case. - Decided in favour of assessee

Issues:
1. Reopening of assessments for AYs 1992-93 and 1993-94 under Section 148 of the Income Tax Act, 1961.
2. Failure to disclose material particulars by the Assessee.
3. Production of agreement with Sumitomo Corporation during assessment proceedings.
4. Traceability of assessment records for AY 1993-94.
5. Application of Section 147 beyond four years after the relevant assessment year.

Analysis:

Issue 1: Reopening of assessments for AYs 1992-93 and 1993-94 under Section 148
The writ petition challenged the notice dated 31st January 2001 issued under Section 148 to reopen the assessments originally made under Section 143(3) for AYs 1992-93 and 1993-94. The primary contention was the failure to disclose material particulars by the Assessee, justifying the reopening beyond the four-year period after the assessment years.

Issue 2: Failure to disclose material particulars
The Revenue argued that the Assessee failed to disclose material particulars, specifically the agreement with Sumitomo Corporation, during the original assessment proceedings. The basis for reopening the assessments was the alleged non-disclosure of the nature of remittance and services rendered, leading to the income escaping assessment.

Issue 3: Production of agreement during assessment proceedings
The dispute centered around whether the agreement with Sumitomo Corporation was produced before the Assessing Officer during the assessment proceedings for AYs 1992-93 and 1993-94. The Assessee contended that the agreement was indeed submitted, as evidenced by affidavits and documentary evidence presented during the case.

Issue 4: Traceability of assessment records
The traceability of assessment records for AY 1993-94 was a crucial aspect of the case, with both the Assessee and the Revenue acknowledging the unavailability of the files. Affidavits and additional submissions highlighted the efforts made to locate the records and the implications of their absence on the assessment process.

Issue 5: Application of Section 147 beyond the four-year period
Section 147 of the Act imposes conditions for reopening assessments beyond four years, emphasizing the necessity of non-disclosure of material particulars by the Assessee. The Court scrutinized the circumstances and concluded that the fundamental condition for resorting to Section 147 was not met in the case at hand.

In conclusion, the Court quashed the notice issued under Section 148 to reopen the assessments for AYs 1992-93 and 1993-94, citing the failure to fulfill the essential conditions for such reopening. The judgment highlighted the importance of disclosing material particulars and the procedural requirements for revisiting assessments beyond the prescribed timeframe.

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