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2020 (10) TMI 997 - HC - Income TaxReopening of assessment u/s 147 - Assessment barred by limitation - HELD THAT - Even though the revenue of the State is involved in the present appeal filed by the Revenue may be more than ₹ 1 Crore, the limit prescribed in the CBDE Circular for withdrawal of the appeal, we do not find any merit in the present appeal filed by the Revenue for the reason that the learned Tribunal has categorically held that there was no failure on the part of the assessee, but disclosed the relevant facts and therefore, merely on the basis of the audit objection or change of opinion and re-assessment under Sections 147 148 of the Income Tax Act, 1961, could not be made beyond the period of four years from the end of the relevant assessment year 1997-98. In the present case, the notice under Section 148 of the Income Tax Act, 1961, was issued on 26.03.2004, as per the assessment order much beyond the period of four years from the end of relevant AY 1997-98. Therefore, in our opinion, the learned Tribunal was justified in annulling the re-assessment order of the AY 1997-98 on the ground of same being barred by limitation as per proviso to Section 147 - Decided in favour of assessee.
Issues Involved:
1. Reopening of assessment beyond the limitation period under Sections 147 & 148 of the Income Tax Act, 1961. 2. Justification of re-assessment order for Assessment Year 1997-98. 3. Applicability of concealment penalty under Section 271(1)(c) of the Income Tax Act, 1961. Issue 1: Reopening of Assessment Beyond Limitation Period: The High Court addressed the issue of reopening the assessment beyond the limitation period under Sections 147 & 148 of the Income Tax Act, 1961. The Tribunal held that the assessing officer was not justified in reopening the assessment after four years from the end of the relevant assessment year as there was no failure on the part of the assessee to disclose all material facts. The Tribunal cited the principle of natural justice and relied on a judgment from the High Court of Uttarakhand to support its decision. It was emphasized that the reassessment was invalid since the assessee had disclosed all material facts regarding the method of recognition of income in the statement of accounts. Consequently, the High Court annulled the reassessment and dismissed the appeal of the revenue as infructuous. Issue 2: Justification of Re-assessment Order for AY 1997-98: The High Court analyzed the justification of the re-assessment order for the Assessment Year (AY) 1997-98. The Tribunal observed that the assessing officer had sufficient details of the income during the original assessment, and there was no failure on the part of the assessee to disclose material facts. The Tribunal highlighted that the reassessment was based solely on an audit objection, which was deemed insufficient to reopen the assessment. By citing a previous case where the Tribunal ruled against reopening based on audit objections alone, the High Court concluded that the re-assessment was unjustified. Consequently, the High Court allowed the assessee's Cross-Objection (C.O.) and dismissed the appeal of the revenue as infructuous. Issue 3: Applicability of Concealment Penalty under Section 271(1)(c): The High Court examined the applicability of the concealment penalty under Section 271(1)(c) of the Income Tax Act, 1961. It was noted that the assessing authority, while making additions to the total income, acknowledged that there was no concealment on the part of the assessee. The addition to the total income was attributed to a change of opinion rather than concealment. The High Court emphasized that the addition was made due to income deferment as per the normal accounting practice of the assessee. Consequently, the High Court found no merit in the revenue's appeal, as the Tribunal's decision regarding the absence of concealment and the basis for the addition to income was upheld. In conclusion, the High Court of Madras, through a detailed analysis of the issues involved, upheld the Tribunal's decision regarding the invalidity of the reassessment beyond the limitation period, the lack of justification for the re-assessment order for AY 1997-98, and the inapplicability of concealment penalty under Section 271(1)(c) of the Income Tax Act, 1961. The appeal filed by the revenue was dismissed, and the assessee's Cross-Objection was allowed.
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