2021 (8) TMI 281 - AT - Income Tax

Reopening of assessment u/s 147 - Eligibility of reasons to believe - HELD THAT - The reasons are to be examined only on the basis of reasons recorded alone, and these reasons cannot be supplemented by anything.There is no allegation to the effect that there has been any failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment. Unless an allegation to this effect is made in the reasons recorded by the Assessing Officer, in a situation where the assessment is being sought to be reopened after four years from end of the relevant assessment year and when the original assessment was completed u/s.143(3), the jurisdiction to carry out the reassessment cannot be lawfully assumed. For this short reason alone, the impugned reassessment proceedings must be held to be vitiated in law. As we have come to a conclusion based on this reason itself that the reassessment proceeding are vitiated in law, we don t find it necessary to deal with other arguments raised by the learned counsel for the assessee, and to deal with the other grounds of appeal. All other grounds of appeal must therefore be held to be academic and infructuous at this stage. We uphold the plea of the assessee and reopening of the reassessment proceeding is quashed. We also see no need to address the other grounds of appeal, on merits, which have been, given our findings on the validity of reassessment proceedings, rendered academic and infructuous.

Issues Involved:
1. Disallowance of deduction under Section 80G of the Income Tax Act, 1961.
2. Validity of the reassessment order under Sections 147, 148, and 151 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction under Section 80G:
The assessee challenged the correctness of the order dated 27th March 2019, passed by the CIT(A), which confirmed the action of the Dy. Commissioner of Income Tax in disallowing the claim of deduction under Section 80G amounting to ?25,00,00,000/-. The assessee argued that the CIT(A) erred in interpreting the facts and relevant regulations, including the Insurance Act 1938, IRDA Act, and related regulations.

2. Validity of the Reassessment Order:
The assessee also questioned the validity of the reassessment order dated 26th November 2014, arguing it was without jurisdiction, invalid, illegal, void, and bad in law as it did not fulfill the jurisdictional preconditions specified in Sections 147, 148, and 151 of the Income Tax Act, 1961.

Admission of Additional Grounds:
The assessee submitted an application for the admission of additional grounds of appeal, which raised fundamental jurisdictional issues regarding the legality of the reassessment order. The Tribunal admitted these additional grounds, considering them foundational and requiring no further investigation of facts.

Reopening of Assessment:
The original assessment under Section 143(3) was completed on 22nd December 2009. However, the Assessing Officer issued a notice under Section 148 on 29th March 2014, citing reasons for reopening, including an audit objection about the incorrect allowance of Chapter VI deduction. The assessee had claimed a deduction of 50% of the donation made to Golden Jubilee Foundation Trust under Section 80G, amounting to ?25 crore. The department argued that this deduction resulted in the underassessment of income by ?25 crore due to the double deduction of the donation.

Assessee's Grievance:
The assessee contended that the reasons for reopening did not constitute legally sustainable reasons and that there was no omission or failure on their part to disclose fully and truly all material facts. The CIT(A) rejected these arguments, stating that the issue of disallowance of the donation under Section 80G was not examined in the original assessment and orders giving effect. The CIT(A) concluded that there was an omission and failure on the assessee's part to disclose fully and truly facts material to the claim of deduction under Section 80G.

Tribunal's Decision:
The Tribunal examined the validity of the reopening of the assessment. It noted that the reasons recorded for reopening did not contain any allegation of failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment. According to the proviso to Section 147, no action can be taken after four years from the end of the relevant assessment year unless there is a failure on the assessee's part to disclose fully and truly all material facts. The Tribunal emphasized that reasons for reopening must be clear, unambiguous, and self-explanatory, and cannot be supplemented by affidavits or oral submissions.

The Tribunal concluded that the reassessment proceedings were vitiated in law due to the absence of any allegation of failure on the part of the assessee in the recorded reasons. As a result, the reassessment proceedings were quashed, and the other grounds of appeal were rendered academic and infructuous.

Conclusion:
In the result, the appeal was allowed, and the reassessment proceedings were quashed due to the invalidity of the reasons recorded for reopening the assessment. The Tribunal did not address the other grounds of appeal on merits, as they were rendered academic and infructuous.

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