2021 (2) TMI 99 - AT - Income Tax

Reopening of assessment u/s 147 - case reopened beyond 4 years after completion of original assessment U/s 143(3) - live link between the reason recorded and the formation of the belief - HELD THAT - It is established law that to reopen an assessment beyond a period of 4 years, where the original assessment has been completed u/s 143 (3) the reasons recorded has to show the escapement of income, is due to failure on part of the assessee to disclose fully and truly all material facts necessary for the assessment for the year under consideration. There must be a live link between the reason recorded and the formation of the belief that income chargeable to tax has escaped assessment because of the failure on the part of the assessee. Both the conditions must coexist in order to confer jurisdiction on the assessing officer. In the present case, the reasons recorded clearly reveals that all facts were available before the Ld.AO, when he completed the original assessment proceedings under section 143(3) of the Act, and no new materials were available on record for reopening the present assessment after expiry of 4 years. Initiation of reassessment proceedings beyond 4 years will have to be held invalid for the reason that the reasons recorded by the Ld.AO, do not spell out that the escapement of income was due to assessee not fully and truly disclosing all material facts necessary for completion of assessment for relevant assessment years. Also seen that the evidences were raised before the Ld.AO and the course of original assessment proceedings under section 143(3) of the Act and the same was not chosen to draw any conclusion. Therefore in the given circumstances we are of the view that Explanation 1 cannot be resorted by the revenue. Therefore, in the absence of the statutory requirement of income chargeable to tax have escaped assessment due to failure on part of assessee to disclose fully and truly all material facts, the notice of reopening of assessment stands invalid. - Decided in favour of assessee.

Summary

Issues:
Validity of notice issued under section 148 beyond 4 years for reopening assessment.

Analysis:
The appeal was filed against the order passed by Ld.CIT(A) for assessment year 2009-10. The appellant challenged the validity of the notice issued under section 148, which was beyond 4 years from the completion of the original assessment under section 143(3). The appellant argued that no new material facts were available for reopening the assessment beyond 4 years, citing legal precedents. The Ld.Sr.DR supported the authorities below, stating that the case was referred for limited scrutiny. The Tribunal examined the reasons recorded by the Ld.AO for reopening the assessment and found that the Ld.AO proceeded based on material already available on record. It was noted that there was no satisfaction recorded by the Ld.AO regarding the failure of the assessee to disclose all material facts. The appellant provided evidence that all necessary facts were disclosed during the original assessment proceedings. Relying on legal judgments, the Tribunal held that the initiation of reassessment proceedings beyond 4 years was invalid as no new material came to the possession of the Ld.AO. Therefore, the notice of reopening the assessment was deemed invalid, and the appeal was allowed, leading to the deletion of the additions made in consequence of the invalid notice.

In conclusion, the Tribunal found that the notice issued under section 148 for reopening the assessment beyond 4 years was invalid as there was no new material to support the reopening, and the reasons recorded did not establish failure on the part of the assessee to disclose all material facts. The Tribunal allowed the appeal, set aside the assessment order, and deleted the additions made, as the statutory requirement for reopening the assessment was not met.