2021 (1) TMI 600 - AT - Income Tax

Validity of Reassessment proceedings u/s. 147/148 - Notice issued after the four years from the date of expiry of the relevant assessment year - HELD THAT - Reason recorded on 20.05.2014 should be considered to be final and absolute reason recorded by the Ld. A.O. for reopening the assessment for assessment year 2009-10 - no allegation is found to be made by the Revenue for not disclosing truly and fully all material facts necessary for the assessment year 2009-10 by the assessee - when the second reason was recorded on 20.05.14, the first reason dated 20.03.14 has lost its force. Had there been no latches on the part of the Revenue in recording reasons by issuing of the Memo on 20.03.14 there would have not been any necessity in issuing the further reason recorded on 20.05.14. Therefore the submission made by the Ld. Counsel appearing for the assessee that the proceeding itself has initiated on the basis of the reasons recorded on 20.05.14 is justified. Whether the subsequent notice dated 20.5.14 issued after the expiry of four years from the date of completion of the relevant assessment year has fulfilled the pre-condition as stipulated by the 1st Proviso of section 147 of the Act by the Revenue? - We find no merit in the reasons recorded for reopening of assessment finally on 20.05.2014, in the absence of any allegation made by Revenue against the assessee for his failure to disclose truly and fully all relevant material facts for assessment for the year under consideration thereby failed to fulfil the pre-condition provided by the 1st Proviso of Section 147 of the Act. The entire proceeding of reassessment dehors the statute, is not maintainable in the eyes of law and hence liable to be rejected. We, therefore, quash the reopening/reassessment proceedings initiated u/s. 147/148 of the Act.- Decided in favour of assessee.

Issues Involved:
1. Maintainability of reassessment proceedings under Section 147/148 of the Income Tax Act, 1961.
2. Compliance with the statutory period and conditions for reopening assessments.
3. Validity of reasons recorded for reopening the assessment.
4. Allegations of failure to disclose material facts by the assessee.

Detailed Analysis:

1. Maintainability of Reassessment Proceedings under Section 147/148 of the Income Tax Act, 1961:
The primary issue raised by the assessee was the maintainability of the reassessment proceedings initiated under Section 147/148 of the Act. The assessee contended that the reassessment order dated 20.03.2015 was based on reasons recorded on 20.05.2014, which was beyond the four-year statutory period from the end of the relevant assessment year (2009-10). According to the assessee, the reasons recorded did not include any specific allegation of failure on their part to disclose fully and truly all material facts necessary for the assessment year, as required by the first proviso to Section 147 of the Act.

2. Compliance with the Statutory Period and Conditions for Reopening Assessments:
The Revenue argued that the reasons for reopening the assessment were recorded within the permissible statutory period. However, the Tribunal noted that the reasons recorded on 20.05.2014 were beyond the four-year period from the end of the relevant assessment year. The Tribunal emphasized that for any action under Section 147 after the expiry of four years, there must be a clear allegation of failure by the assessee to disclose all material facts necessary for the assessment.

3. Validity of Reasons Recorded for Reopening the Assessment:
The Tribunal examined the reasons recorded by the Assessing Officer (A.O.) on 20.03.2014 and 20.05.2014. The initial reason recorded on 20.03.2014 mentioned a discrepancy in the stock value amounting to ?97.26 Crores, which allegedly attracted the provisions of Section 69A of the Act. Subsequently, another reason was recorded on 20.05.2014, citing information about bogus transactions amounting to ?34,81,02,225/-. The Tribunal observed that the second reason superseded the first, making the latter irrelevant. The absence of any allegation of failure by the assessee to disclose material facts in the reasons recorded on 20.05.2014 rendered the reassessment proceedings invalid.

4. Allegations of Failure to Disclose Material Facts by the Assessee:
The Tribunal highlighted that the reasons recorded on 20.05.2014 did not contain any allegation of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment year 2009-10. This omission was critical, as the first proviso to Section 147 mandates such an allegation for reopening assessments beyond the four-year period. The Tribunal relied on the judgments of the Hon'ble Bombay High Court in Hindustan Lever Ltd. vs. R.B. Wadkar and the Hon'ble Gauhati High Court in Assam Co. Ltd. vs. Union of India, which held that reassessment beyond four years without such an allegation was bad in law and barred by limitation.

Conclusion:
The Tribunal concluded that the reassessment proceedings initiated under Section 147/148 were not maintainable as they failed to comply with the statutory requirements. The absence of any allegation of failure by the assessee to disclose material facts necessary for the assessment year 2009-10, as stipulated by the first proviso to Section 147, rendered the proceedings invalid. Consequently, the reassessment proceedings were quashed, and the appeal of the Revenue and the cross-objection of the assessee were dismissed.

Pronouncement:
The order was pronounced in the open court on 16.12.2020.

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