2020 (1) TMI 685 - AT - Income Tax

Validity of re-opening of the assessment u/s 147 - eligible reasons to believe - HELD THAT - Re-opening is bad in law as it is nowhere recorded in the reasons for re-opening that there was the failure on the part of the assessee truly and fully disclose material facts required for the assessment. See AMIYA SALES AND INDUSTRIES AND ANOTHER VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX OTHERS. 2004 (9) TMI 32 - CALCUTTA HIGH COURT DR relied on case of A.G. Holdings Pvt. Ltd. 2012 (5) TMI 44 - DELHI HIGH COURT which is not at all applicable to the facts of the case on hand wherein the proviso to Section 147 was not the subject matter as the original assessment was not done u/s 143(3) of the Act. The original return of income in that case was processed u/s 143(1) of the Act. The applicability of the proviso to Section 147 of the Act was not the subject matter of adjudication. Hence this case law does not help the Revenue. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of re-opening of the assessment under Section 147 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of Re-opening of the Assessment under Section 147 of the Income Tax Act, 1961:

The primary issue in this judgment is whether the re-opening of the assessment under Section 147 of the Income Tax Act, 1961, for the Assessment Year (AY) 2008-09, was valid. The assessee challenged the re-opening on the grounds that it did not comply with the legal requirements stipulated under Section 147, particularly the proviso which necessitates the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.

The facts of the case reveal that the assessee filed the return of income for AY 2008-09 on 04.06.2009, disclosing a total income of ?52,08,98,320/-. The initial assessment was completed under Section 143(3) on 12.05.2010, determining the income at ?53,02,64,479/-. Subsequently, the assessment was re-opened under Section 147, leading to a revised assessment order on 21.01.2014, with the total income determined at ?54,69,61,226/-. The re-opening was based on information received from the I.T.O., Ward-2(1), Ghaziabad, about bogus purchases amounting to ?25,65,05,225/- from various individuals.

The assessee's counsel argued that the reasons for re-opening did not mention any failure to disclose material facts fully and truly, which is a prerequisite for re-opening an assessment after four years from the end of the relevant assessment year. The counsel cited several case laws, including decisions from the Hon'ble ITAT, Kolkata, and the Hon'ble High Courts of Kolkata and Delhi, to support the argument that the re-opening was invalid due to non-fulfillment of the conditions stipulated in the proviso to Section 147.

The Revenue, represented by the CIT(DR), contended that the Assessing Officer (AO) had sufficient material to form a prima facie belief for re-opening the assessment and relied on the judgment of A.G. Holdings (P.) Ltd. vs. Income-tax Officer.

The tribunal examined the proviso to Section 147, which states that no action shall be taken after four years from the end of the relevant assessment year unless the income chargeable to tax has escaped assessment due to the failure of the assessee to disclose fully and truly all material facts. The tribunal referred to several judicial precedents, including decisions from the Hon'ble Bombay High Court, the Hon'ble Delhi High Court, and the Hon'ble Calcutta High Court, which consistently held that the absence of an allegation of failure to disclose material facts in the reasons for re-opening renders the re-opening invalid.

The tribunal concluded that the re-opening of the assessment was not valid as there was no mention in the reasons recorded for re-opening that the assessee had failed to disclose fully and truly all material facts necessary for the assessment. The tribunal emphasized that the re-opening was based on the same material and records without any new tangible material coming to the possession of the AO. Therefore, the re-opening was held to be bad in law.

Conclusion:

The tribunal quashed the re-assessment as invalid and allowed the appeal of the assessee while dismissing the appeal of the Revenue. The decision underscores the importance of adhering to the legal requirements for re-opening assessments under Section 147, particularly the necessity of recording the failure to disclose material facts fully and truly as stipulated in the proviso to Section 147.