2016 (7) TMI 135 - AT - Income Tax

Validity of reopening proceedings u/s 147 - Held that - It is the duty of AO to show prima-facie, and establish in the reason recorded, that income chargeable to tax has escaped assessment by the reason of failure on the part of assessee to disclose fully and truly all material fact necessary for assessment. In the instant case there is no allegation or stipulation showing that income chargeable to tax has escaped assessment due to failure on the part of assessee to disclose fully and truly all material fact necessary for assessment. Relied on Delhi High Court in the case of CIT v. Vishishth Chay Vyapark Ltd. (ITA No.1108-1109/2010)wherein inter-alia it was held that Merely having a reason to believe that income had escaped assessment is not sufficient to reopen assessments beyond 4 year period. The escapement also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to Sec. 147. If this condition is not satisfied, the bar would operate and no action under Section 147 could be taken. In view of above, we are inclined to hold that AO did not assume valid jurisdiction for initiation of proceedings u/s 147 beyond 4 years. Hence, we quash the same - Decided in favour of assessee.

Summary

Issues Involved:

1. Validity of reopening proceedings under Section 147 of the Income Tax Act.
2. Confirmation of additions made by the Assessing Officer (AO) on account of commission payments.

Issue-wise Detailed Analysis:

1. Validity of Reopening Proceedings under Section 147 of the Income Tax Act:

The assessee challenged the validity of the reopening proceedings initiated under Section 147 of the Income Tax Act, arguing that the initiation was beyond the four-year period prescribed by law. The original assessment was completed under Section 143(3) on 31.03.2006, and the notice for reopening was issued on 01.04.2009. The assessee contended that for reopening beyond four years, it must be shown that the income escaped assessment due to the assessee's failure to fully and truly disclose all material facts. The reasons recorded by the AO did not indicate any such failure on the part of the assessee. The Tribunal noted that the AO failed to establish that the income chargeable to tax had escaped assessment due to the assessee's failure to disclose fully and truly all material facts necessary for the assessment. The Tribunal relied on the judgment of the Hon'ble Delhi High Court in CIT v. Vishishth Chay Vyapark Ltd., which stated that merely having a reason to believe that income had escaped assessment is not sufficient to reopen assessments beyond four years unless it is occasioned by the assessee's failure to disclose material facts fully and truly. Consequently, the Tribunal quashed the reopening proceedings and the issuance of the notice under Section 148, rendering the reassessment order void and without jurisdiction.

2. Confirmation of Additions Made by the AO on Account of Commission Payments:

Since the Tribunal quashed the initiation of proceedings and issuance of the notice under Section 147, the remaining grounds on the merits of the additions made by the AO became academic and infructuous. The assessee had challenged the confirmation of various additions made by the AO on account of commission payments to different entities. However, as the reassessment proceedings were quashed, these grounds were dismissed as infructuous.

Conclusion:

The Tribunal allowed the assessee's appeal on the legal grounds, quashing the reassessment proceedings initiated under Section 147, and dismissed the grounds on the merits as infructuous. Consequently, the Revenue's appeal was also dismissed as infructuous. The order was pronounced in the open court on 22/06/2016.