2019 (10) TMI 389 - AT - Income Tax

Reopening of assessment u/s 147 - non disclosure of full and true facts - HELD THAT - As during the course of scrutiny assessment proceedings the books of account were examined and test checked. In light of these facts, coming back to the reasons recorded for reopening of the assessment as mentioned elsewhere, it can be seen that the AO has borrowed the information received from the Director INV and on the basis of this information, he had reason to belief that income has escaped assessment and it is a fit case for reopening. Considering the facts of the case in totality, in light of the judicial decisions discussed hereinabove and keeping in mind the first proviso to section 147 of the Act, we are of the considered view that the notice issued u/s 148 of the Act is without jurisdiction and deserves to be set aside.

Summary

Issues:
Challenge to validity of assessment order under section 143(3) r.w.s 147.

Analysis:
The appeal challenged the validity of the assessment order under section 143(3) r.w.s 147 of the Income-tax Act, 1961. The issue revolved around the reopening of the assessment and the jurisdiction of framing the impugned assessment order. The original assessment order was framed on 27.02.2004, assessing the returned income at ?2,91,540. However, on 27.07.2008, the Assessing Officer issued a notice under section 148, reopening the completed assessment based on information received regarding accommodation entries and commission amounts. The key contention was whether the reopening of the assessment beyond four years from the end of the relevant assessment year was justified under the provisions of the Act.

The proviso to section 147 of the Act stipulates that no action shall be taken after the expiry of four years from the end of the relevant assessment year unless income chargeable to tax has escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The reasons for reopening the assessment lacked any mention of non-disclosure of material facts by the assessee. Citing legal precedents, it was emphasized that the escapement of income must be a result of the assessee's failure to disclose material facts for the Assessing Officer to have jurisdiction beyond the four-year period. The absence of such an allegation rendered the notice under section 148 without jurisdiction.

Relying on judgments from the High Courts of Delhi, Punjab, and Haryana, it was concluded that the notice issued under section 148 was without jurisdiction due to the lack of evidence of the assessee's failure to disclose material facts. The assessment order was subsequently quashed, and the appeal of the assessee was allowed. The decision highlighted the importance of fulfilling the conditions precedent for initiating proceedings under section 147 beyond the statutory period, emphasizing the necessity of the assessee's failure to disclose material facts for the Assessing Officer to acquire jurisdiction.

In light of the legal principles and the specific provisions of the Act, the Tribunal held that the notice under section 148 was not validly issued as it did not establish the assessee's failure to disclose material facts necessary for assessment. The decision underscored the significance of complying with the statutory requirements for reopening assessments beyond the prescribed period, ensuring that the jurisdiction of the Assessing Officer is appropriately exercised based on the assessee's actions or inactions regarding disclosure of material facts.