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2019 (9) TMI 2 - AT - Income TaxReopening of assessment u/s 147 - reopening after four years - HELD THAT - As decided in FORAMER FRANCE 2003 (1) TMI 101 - SC ORDER admittedly no failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment. Hence the proviso to the new section 147 squarely applies and the impugned notices were barred by limitation mentioned in the proviso Although we are of the opinion that the law existing on the date of the impugned notice under section 147/148 has to be seen yet even in the alternative even if we assume that the law prior to the insertion of the new section 147 will apply even then it will make no difference since even under the original section 147 notice for reassessment could not be given on the mere change of opinion as held in numerous cases - Decided in favour of assessee.
Issues Involved:
1. Reopening of assessment beyond four years. 2. Failure to disclose fully and truly all material facts necessary for assessment. 3. Validity of reassessment based on information from investigation wing. Detailed Analysis: 1. Reopening of Assessment Beyond Four Years: The primary issue in this appeal concerns the reopening of the assessment beyond four years. The assessee contested the reopening of the assessment by the Assessing Officer (AO), which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The original return of income was filed on 31.10.2007 for AY 2007-08, and the assessment was completed under section 143(3) on 20.10.2009. The AO issued a notice under section 148 on 28.03.2014, beyond the four-year period stipulated. The assessee argued that the reopening was unjustified as it was covered under the proviso to section 147 of the Income Tax Act, 1961, which restricts reopening beyond four years unless there is a failure to disclose material facts. 2. Failure to Disclose Fully and Truly All Material Facts Necessary for Assessment: The assessee contended that during the original assessment proceedings, all necessary documents and details were provided to the AO, including details of share capital, PAN cards, bank statements of shareholders, and share certificates. The AO had accepted these transactions as genuine after due verification. The assessee argued that there was no failure on their part to disclose fully and truly all material facts necessary for assessment, and therefore, the reopening of the assessment was not justified. 3. Validity of Reassessment Based on Information from Investigation Wing: The AO reopened the assessment based on information received from the Directorate of Income Tax (Investigation) regarding the assessee obtaining accommodation entries from bogus concerns managed by Shri Pravin Kumar Jain. The AO cited a search conducted on 01.10.2013, which revealed that these entities provided accommodation entries to reduce tax liability. The assessee argued that the AO did not provide an opportunity for cross-examination of the parties whose statements were relied upon and that the reopening was based on borrowed satisfaction rather than independent application of mind by the AO. Tribunal's Findings: The Tribunal found that the AO's reasons for reopening the assessment did not indicate any failure on the part of the assessee to disclose material facts. It was noted that the original assessment was completed after thorough verification, and the AO had accepted the transactions as genuine. The Tribunal relied on the decision of the Hon’ble Bombay High Court in the case of PCIT vs. Shodiman Investments (P) Ltd, which emphasized the necessity of a live link between the material and the formation of belief regarding escapement of income. The Tribunal also referred to the Hon’ble Supreme Court's decision in CIT vs. Foramer France, which held that the proviso to section 147 restricts reopening beyond four years unless there is a failure to disclose material facts. In the absence of such failure, the notice under section 148 issued beyond four years was deemed barred by limitation and without jurisdiction. Conclusion: The Tribunal quashed the orders of the lower authorities, holding that the reopening of the assessment was not justified as there was no failure on the part of the assessee to disclose material facts. Consequently, the reassessment order was quashed, and the appeal of the assessee was allowed on the jurisdictional issue. The Tribunal refrained from adjudicating the merits of the case since the jurisdictional issue was decided in favor of the assessee. Order Pronounced: The appeal of the assessee was allowed on the jurisdictional issue, and the order was pronounced in the open court on 12-06-2019.
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