2018 (12) TMI 52 - HC - Income Tax

Reopening of assessment - whether mere disclosure in a re-assessment proceedings would permit the assessee to be absolved of the liability of re-assessment after four years but within six years if there was no full and true disclosure at the time of the original assessment ie. under Section 143(1)(a)? - whether non-disclosure at the time of first re-assessment was the ground on which the First Appellate Authority or the Tribunal set aside the second re-assessment proceedings? - Held that - We find that there can be no allegation raised of nondisclosure of full and true material facts especially since it to be noticed that the estimation of profits on the contract bills were made by the A.O. himself for the previous assessment year. The expenses were also allowed on the estimation of profits. The assessee had claimed the benefit since the receipt was accounted by the assessee in the previous year to the subject assessment year. What is pertinent is that the earlier years assessment was completed making the estimation on certain contract receipts on 24.11.2000 under Section 143(3) read with Section 147. The return of income for 1998-99 was filed on 31.03.2000 prior to the completion of assessment of the previous assessment year. AO who carried out such assessment under Section 143(1) and 143(3) ought to have been more careful in having scrutinized the assessment order of the earlier year wherein the additions were made estimating a profit with respect to certain contract receipts. In any event there could not have been any non-disclosure of full and true material facts alleged by the assessee since the return was filed long prior to the estimation made. In such circumstances we are of the opinion that the proceedings itself was misconceived and the assessee had to file a first appeal in which the proceedings under Section 147 was set aside. - Decided in favour of assessee.

Summary

Issues:
1. Reopening of assessment under Section 148 after the four-year period.
2. Claim of full disclosure during re-assessment proceedings.
3. Question of law regarding disclosure in re-assessment proceedings.
4. Allegation of non-disclosure of material facts for assessment.
5. Misconceived proceedings under Section 147.

Analysis:

1. The judgment dealt with the reopening of assessment under Section 148 after the four-year period stipulated in Section 147. The case involved a partnership firm engaged in civil contracts. The assessment for the year 1998-99 was reopened due to a notice issued after the four-year period, concerning a repeated claim allowed in the previous year. The primary contention was whether such a reopening was valid after the initial assessment and re-assessment processes.

2. The assessee argued that full disclosure was made during the earlier re-assessment proceedings within the four-year period, thereby precluding the necessity for further re-assessment based on non-disclosure of material facts. The question arose whether disclosure during re-assessment proceedings absolved the assessee from liability for re-assessment after four years but within six years, especially if there was no complete disclosure during the original assessment under Section 143(1)(a).

3. The court examined the facts related to the assessment year 1997-98, where the assessment was completed under Section 143(3) read with Section 147, estimating profits from business based on certain bills and expenses. The re-assessment proceedings for the subsequent year were initiated due to a claim made for the assessment year 1998-99, which had already been allowed in the previous year. The court emphasized the importance of full and true disclosure of material facts during assessments.

4. It was observed that the allegations of non-disclosure were unfounded, as the estimation of profits and allowance of expenses were made by the Assessing Officer in the previous assessment year. The court highlighted that the assessee had accounted for receipts in the previous year, which affected the subsequent year's assessment. The initiation of proceedings under Section 147 based on alleged non-disclosure was deemed misconceived, considering the timeline of filings and assessments.

5. Ultimately, the court upheld the decision of the Tribunal, ruling that the proceedings under Section 147 were flawed. The judgment emphasized the need for careful scrutiny by the Assessing Officer and concluded that the assessee was entitled to reimbursement of costs incurred during the legal proceedings. The appeal was rejected, and costs were awarded to the assessee.