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2020 (12) TMI 221 - AT - Income TaxReopening of assessment u/s 147 - Non issue of notice u/s 143 - contention of the Revenue that since the assessee did not file return of income pursuant to notice u/s. 148 AO was justified in not issuing notice under sub-section (2) of section 143 of the Act - HELD THAT - Since assessee pursuant to the section 148 notice has replied to the AO to treat the original return filed by it, as return pursuant to notice under section 148 which fact has been admitted/acknowledged by the AO in the first paragraph of the impugned re-assessment order dated 28.03.2016. AO was not justified in not issuing notice u/s 143(2) of the Act before framing reassessment order u/s 147/143(3) of the Act, therefore we find no merit in the contention of the revenue. The revenue has cited the decision in Areva T D India Ltd. 2006 (11) TMI 166 - MADRAS HIGH COURT to support their ground on this legal issue - in the light of the Hon ble Supreme Court s decision in the case of Hotel Blue Moon 2010 (2) TMI 1 - SUPREME COURT as well as in the case of Oberoi Hotels Pvt. Ltd. 2018 (6) TMI 1472 - CALCUTTA HIGH COURT we are bound by the decisions of the Hon ble Supreme Court and jurisdictional High Court, therefore, we are not further going into the merit of this contention of the revenue. Therefore no merit in the contention of the revenue and, therefore, we confirm the action of Ld CIT(A) on this legal issue and consequently, the ground nos. 2 and 3 of revenue stand dismissed. Original assessment was completed u/s. 143(3) - more than four years have elapsed after passing the order - Whether failure of the assessee to disclose fully and truly all material facts necessary for the assessment for the assessment year ? - HELD THAT - In this case original assessment was completed under Section 143(3) of the Act and such concluded assessment when sought to be reopened beyond four years, it is not only necessary for the AO to form reasonable belief that income had escaped assessment as envisaged in Section 147 of the Act but additionally he has to show that such escapement occurred as a result or consequence of assessee s failure to disclose truly and fully all facts necessary for assessment. It is to be kept in mind that the AO after obtaining information and documents from the assessee cannot supplement/supplant his conclusion about assessee s failure to disclose truly and fully material facts, if the recorded reasons do not refer to such failure. Where the AO initiates the reassessment proceedings beyond four years from the end of the relevant assessment year, then the AO is duty bound to demonstrate in his reasons recorded prior to issue of notice, the failure on the assessee s part to truly and fully disclose all material facts in the course of original assessment, which in this case, the AO has not made even a whisper to that effect, therefore, the essential condition precedent as stipulated in first proviso to section 147 of the Act has not been satisfied, therefore, the AO could not have usurped the jurisdiction without satisfying the same, therefore, we find no infirmity in the order of Ld. CIT(A) on this issue also, so we confirm the impugned action of Ld CIT(A) on this legal issue and so revenue s ground no. 1 fails.
Issues Involved:
1. Legality of reopening assessment under Section 147 of the Income Tax Act. 2. Non-issuance of notice under Section 143(2) of the Income Tax Act. 3. Whether the assessee failed to disclose fully and truly all material facts necessary for the assessment. 4. Deletion of the addition of ?48,16,666/- as disallowance of excess expenditure claim by the assessee. Issue-wise Detailed Analysis: 1. Legality of Reopening Assessment under Section 147 of the Income Tax Act: The revenue challenged the Ld. CIT(A)'s decision to delete the reopening assessment under Section 147. The original assessment was completed under Section 143(3), and more than four years had elapsed. The first proviso to Section 147 mandates that reopening can only occur if there was a failure by the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal noted that the AO failed to mention any failure on the part of the assessee to disclose material facts in the recorded reasons for reopening. The Tribunal emphasized that both conditions—reason to believe there was under-assessment and that such under-assessment resulted from non-disclosure of material facts—must co-exist for reopening after four years. Since the AO did not satisfy these conditions, the Tribunal upheld the Ld. CIT(A)'s decision. 2. Non-issuance of Notice under Section 143(2) of the Income Tax Act: The revenue argued that the AO's action of not issuing a notice under Section 143(2) was valid because the assessee did not file a return in response to the notice under Section 148. However, the Tribunal highlighted that the issuance of notice under Section 143(2) is mandatory for framing a scrutiny assessment under Section 143(3). This was supported by the Hon'ble Supreme Court's decision in ACIT Vs. Hotel Blue Moon and the Hon'ble Calcutta High Court's decision in M/s. Oberoi Hotels Pvt. Ltd. The Tribunal also referenced the Hon'ble Kerala High Court's decision in Travancore Diagnostics (P) Ltd. Vs. ACIT, which held that omission to issue such notice is a defect that goes to the root of the jurisdiction. Consequently, the Tribunal dismissed the revenue's contention and upheld the Ld. CIT(A)'s decision. 3. Failure to Disclose Fully and Truly All Material Facts: The Tribunal examined whether the assessee failed to disclose fully and truly all material facts necessary for the assessment. The AO's reasons for reopening were based on an audit objection regarding miscellaneous income from M/s. Max New York Life Insurance Corporation Ltd. The Tribunal noted that the assessee had already explained the discrepancy in 2011, attributing it to different accounting methods. Since the AO did not mention any failure by the assessee to disclose material facts in the recorded reasons, the Tribunal concluded that the condition precedent for reopening under the first proviso to Section 147 was not satisfied. Therefore, the Tribunal upheld the Ld. CIT(A)'s decision. 4. Deletion of Addition of ?48,16,666/-: Given the Tribunal's decision on the legality of the reopening assessment and the non-issuance of notice under Section 143(2), the ground regarding the deletion of the addition of ?48,16,666/- became academic in nature. The Tribunal did not provide a detailed analysis on this issue, as the primary grounds for reopening the assessment were already dismissed. Conclusion: The Tribunal dismissed the revenue's appeal, upholding the Ld. CIT(A)'s decision to delete the reopening assessment under Section 147 and the non-issuance of notice under Section 143(2). The Tribunal confirmed that the AO did not satisfy the conditions precedent for reopening the assessment after four years and that the issuance of notice under Section 143(2) is mandatory. Consequently, the addition of ?48,16,666/- was also dismissed as academic.
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