2021 (4) TMI 26 - HC - Income Tax

Reopening of assessment u/s 147 - notice beyond the period of four years - allowability of legal and professional expenses - whether re-opening is made only on change of opinion? - HELD THAT - As per proviso to Section 148, it is clear that in the case of re-opening made beyond four years from the end of the relevant assessment year, it can only be resorted to in case of failure on the part of the assessee in disclosing, fully and truly, all material facts necessary for the assessment. However, this failure was not pointed out in the assessment order by the Assessing Officer. Therefore, it is clear that it can only be change of opinion on the part of the Assessing Officer with regard to the legal and professional expenses, which is against the provisions of proviso to Section 148. The Tribunal has rightly dismissed the appeal filed by the Revenue. The findings of the Income Tax Appellate Tribunal is proper. We do not find any ground much less any substantial question of law to interfere with the order passed by the Tribunal. The appeal is liable to be dismissed.

Summary

Issues:
Challenge to order passed by Income Tax Appellate Tribunal for assessment year 2004-05; Validity of re-opening assessment; Sufficiency of material information disclosed by assessee during original assessment.

Analysis:
The case involves a challenge to an order passed by the Income Tax Appellate Tribunal regarding the assessment year 2004-05. The Revenue filed an appeal questioning the Tribunal's decision on the grounds of re-opening the assessment and the sufficiency of material information disclosed by the assessee during the original assessment.

The Tribunal found that the re-opening of the assessment was beyond the permissible period and lacked justification as the assessee had provided all necessary details during the original assessment. The Commissioner of Income Tax also deemed the re-opening as a mere change of opinion by the Assessing Officer. The re-opening notice was issued after four years from the end of the relevant assessment year, which, as per Section 148, requires a failure on the part of the assessee to disclose material facts. However, the Assessing Officer did not point out any such failure in the assessment order, indicating a change of opinion rather than a valid reason for re-opening.

The judgment highlights that re-opening an assessment beyond the prescribed period must be based on the failure of the assessee to disclose material facts. Since no such failure was identified by the Assessing Officer, the Tribunal rightly dismissed the appeal filed by the Revenue. The Court concurred with the Tribunal's decision, emphasizing that there was no legal basis to interfere with the order. Consequently, the Tax Case Appeal was dismissed without costs.

In conclusion, the judgment clarifies the importance of adhering to legal provisions when re-opening assessments and ensuring that such actions are not merely based on a change of opinion. It underscores the necessity for assessing officers to establish valid reasons for re-opening assessments beyond the specified timeframe, based on the failure of the assessee to disclose material facts essential for the assessment process.