2020 (9) TMI 280 - AT - Income Tax

Reopening of assessment u/s 147 - power of the AO to reopen - HELD THAT - Interdiction provided in the proviso appended to section 147 of the Income Tax Act puts embargo on the power of the AO to reopen an assessment in the cases where four years have been expired and the assessment was framed under section 143(3) of the Act. The assessment cannot be reopened unless it is established that the assessee has failed to disclose fully and truly all material facts necessary for the assessment for that assessment year. A perusal of the reasons extracted would indicate that nowhere the AO has made out that the income has escaped the assessment on account of failure of the assessee to disclose all material acts fully and truly. Therefore reassessment is not sustainable. - Decided in favour of assessee.

Summary

Issues:
1. Validity of reopening of assessment under section 147 of the Income Tax Act, 1961.
2. Sustainability of reassessment order passed under section 143(3) r.w.s. 147 of the Act.
3. Application for recall of Tribunal's order regarding adjudication of grounds of appeal.

Issue 1: Validity of Reopening of Assessment:
The appellant challenged the reopening of the assessment under section 147 of the Income Tax Act, 1961. The Tribunal acknowledged that the grounds related to the validity of the notice under section 148 and the confirming of the re-assessment order were not adjudicated on merit. The Tribunal found this to be an error apparent on the face of the record and recalled the order to hear the matter afresh on the maintainability of the re-assessment proceeding.

Issue 2: Sustainability of Reassessment Order:
The appellant had initially declared a total loss in the return of income. The assessment order determined the total income at NIL under section 143(3) of the Act. Subsequently, the assessment proceedings were reopened, resulting in a reassessment order determining the total income at a significant amount. The appellant contended that the second reopening of assessment, after four years from the end of the relevant assessment year, lacked justification as the AO failed to demonstrate that all material facts were not fully and truly disclosed. The Tribunal agreed with the appellant, noting that the reassessment order was unsustainable in the eyes of the law. The Tribunal referred to relevant case laws and quashed the reassessment order.

Issue 3: Application for Recall of Tribunal's Order:
The appellant filed a miscellaneous application seeking to recall the Tribunal's order to the extent it failed to adjudicate two grounds of appeal. However, the Tribunal recalled the complete order. Consequently, the Tribunal was bound to adjudicate the issue on merit. After reviewing the record, the Tribunal reiterated its original findings on the merits of the issues in the original order. The appeal of the assessee was partly allowed in light of the above observations.

In conclusion, the Tribunal found the reassessment order to be unsustainable due to the failure to disclose all material facts fully and truly, thereby allowing the appeal partly. The Tribunal's decision highlighted the importance of adherence to procedural requirements and the necessity of justifying the reopening of assessments under the Income Tax Act, 1961.