2018 (2) TMI 763 - HC - Income Tax

Reopening of assessment - notice issued after four years - disallowance of claim of expenditure of 30% of the receipts - Held that - As during the survey operations, the assessee was confronted with such entry in the diary and the assessee admitted that the said figure of ₹ 5,96,914/represented his unaccounted cash and professional receipts, which he had not offered to tax. While therefore filing a return in response to the notice under section 148 of the Act, the assessee included such income in the declared income. The Assessing Officer accepted such return and, as noted earlier, barring minor adjustment of claim of expenditure, confirmed the assessee s declaration of income. To reopen such assessment, the impugned notice came to be issued which clearly is beyond the period of four years from the end of relevant assessment year. The reasons proceed concededly only on the material available on record. Such relevant material included the notings in the assessee s diary which recorded a figure of ₹ 5,96,914/as outstanding fees to be collected and other entries referring to certain outstanding payments. Fact remains that whatever legal conclusions on the basis of the factual analysis the Assessing Officer desirous to arrive at, is based on the material already on record all throughout during previously reopened assessment proceedings. In absence of any new information or material which do not form part of the original assessment proceedings, it would not be open for the Assessing Officer to frame fresh assessment, that too, in a case where the notice of reopening has been issued beyond a period of four years - Decided in favour of assessee

Summary

Issues:
Challenge to notice seeking to reopen assessment for assessment year 2010-11 based on unaccounted professional receipts found during survey operation.

Analysis:
The petitioner, a professional architect, filed his income tax return for the assessment year 2010-11, which was accepted under section 143(1) of the Act. However, a survey operation under section 133A of the Act led to the Assessing Officer issuing a notice under section 148 of the Act to reopen the assessment based on unaccounted professional receipts amounting to ?5,96,914 found during the survey. The Assessing Officer contended that the petitioner failed to disclose fully and truly the material facts necessary for assessment, leading to income escaping assessment. The petitioner, in response to the notice, declared the unaccounted income in the return. The Assessing Officer made certain disallowances and accepted the returned income. Subsequently, another notice was issued to reopen the assessment based on the same unaccounted receipts, claiming the figures in the petitioner's diary were underreported by removing one zero, thus asserting a higher undisclosed income.

The Assessing Officer's reasons for reopening the assessment were based on the material already on record during the previous assessment proceedings. The court held that without any new information or material not part of the original assessment proceedings, it was not permissible for the Assessing Officer to frame a fresh assessment, especially when the notice of reopening was issued beyond the prescribed period of four years. Allowing a reexamination of the issue based on the same materials would undermine the finality of an assessment order, which should only be revisited on legally recognized grounds. Consequently, the petitions challenging the reopening notices were allowed, and the notices were set aside.