2019 (5) TMI 351 - HC - Income Tax

Re-assessment u/s 147 - original assessment u/s 143(3) - limitation of 4 years for re-opening - failure on the part of the assessee to disclose all the relevant facts truly and fully for assessment - deduction u/s 80IB(10) - HELD THAT - The Assessing Authority cannot have a mere re-appreciation of the same facts or a review of existing material on a mere change of opinion and take a different view of the matter and he is not permitted to undertake the re-assessment proceedings. The condition of 4 years provided in 1st proviso to Section 147 of the Act is a protection in favour of the Assessee against the whimsical and arbitrary re-assessment proceedings initiated by the Assessing Authorities beyond this limitation of 4 years, except where the escapement of income has resulted on account of failure on the part of Assessee to disclose the material particulars. We find that the Assessee had made true and full disclosure and had consciously made only a proportionate claim u/s 80IB(10), which was rightly allowed by the Assessing Authority at the time of original assessment proceedings u/s 143(3) and therefore after the expiry of 4 years in 2010, the impugned notice u/s 147/148 for AY 2003-04 issued on 31.03.2010 was not a valid initiation of the re-assessment proceedings. We are of the considered opinion that the learned Single Judge was justified in quashing the impugned re-assessment proceeding and there is no merit in the present appeal filed by Revenue. - writ appeal by Revenue is dismissed.

Summary

Issues Involved:
1. Validity of re-assessment notice issued beyond the prescribed limitation period.
2. Failure to disclose material facts by the Assessee.
3. Change of opinion by the Assessing Authority.

Comprehensive, Issue-wise Detailed Analysis:

1. Validity of Re-assessment Notice Issued Beyond the Prescribed Limitation Period:
The Revenue Department filed an appeal against the order of the learned Single Judge, who quashed the re-assessment notice and proceedings under Sections 147/148 of the Income Tax Act, 1961, initiated against the Assessee for the Assessment Year 2003-04. The learned Single Judge held that the re-assessment notice was issued beyond the prescribed limitation of four years. The 1st proviso to Section 147 of the Income Tax Act prohibits such re-assessment proceedings unless there is a failure on the part of the Assessee to fully and truly disclose all material facts necessary for assessment.

2. Failure to Disclose Material Facts by the Assessee:
The Revenue argued that the Assessee failed to disclose all relevant particulars about the difference in areas of residential units, leading to a failure to disclose material facts truly and fully. Therefore, the limitation of four years for re-opening did not apply. The Assessee countered that all details were disclosed in the original return and during the original assessment proceedings under Section 143(3) of the Act. The Assessee claimed only the proportionate benefit under Section 80IB(10) for eligible residential units below 1500 sq. ft., indicating full disclosure of material facts.

3. Change of Opinion by the Assessing Authority:
The Assessee submitted that the re-assessment proceedings were initiated merely on a change of opinion by the Assessing Authority, which is not permissible. The original assessment order dated 20.12.2005 under Section 143(3) of the Act included all details about the projects, and the proportionate claim was made consciously. The Assessing Authority had all the powers to call for further details during the original assessment, which were provided by the Assessee. The reasons assigned for re-assessment, such as the residential units over 1500 sq. ft. not being disclosed, were found to be baseless.

Detailed Judgment Analysis:
The court noted that the 1st Proviso to Section 147 of the Act provides a limitation of four years from the end of the relevant assessment year, and re-assessment can only be undertaken if there is a failure on the part of the Assessee to disclose fully and truly all material facts necessary for assessment. The court found no such failure on the part of the Assessee, who disclosed all relevant facts and claimed only a proportionate deduction under Section 80IB(10) of the Act. The re-assessment proceedings initiated after four years were deemed to be without valid reason and based on a mere change of opinion, which is not permissible under the Act. The court emphasized that the condition of four years provided in the 1st proviso to Section 147 is a protection against arbitrary re-assessment proceedings.

The court concluded that the Assessee had made true and full disclosure and that the original assessment order under Section 143(3) was passed with a conscious application of mind. Therefore, the impugned notice under Section 147/148 issued after the expiry of four years was invalid. The learned Single Judge was justified in quashing the re-assessment proceedings, and the appeal filed by the Revenue was dismissed.