2021 (12) TMI 495 - AT - Income Tax

Reopening of assessment u/s 147 - eligibility of reason to believe - bogus purchases addition - HELD THAT - The reasons recorded for issuing notice provide the link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer must disclose in the reasons as to nature of fact and material not disclosed by the assessee fully and truly which was necessary for assessment for that assessment year. On perusal of reasons recorded by AO which are we find that the AO has not specified that there was failure on the part of assessee to disclose all material facts necessary for its assessment during the course of regular assessment proceedings. As mentioned in Para 9 10 above, it is evident that a specific query was raised by the Assessing Officer with respect to purchases claimed by the assessee and the same was appropriately replied to by the assessee. The reply having been found satisfactory the assessment was completed accepting the claim of purchases. Once again the very same issue is sought to be raised for the purpose of reopening which is otherwise not permissible in law as the same is based on a change of opinion. It cannot be said that there was any failure on the part of the assessee to fully and truly disclose all the material facts. The present case, in our opinion, could be said to be squarely covered by the decision of the Supreme Court rendered in the case of CIT vs. Kelvinator India 2010 (1) TMI 11 - SUPREME COURT No case for Revenue that assessee had failed to disclose all material facts fully and truly, the impugned notice under Section 148 of the Act issued to the assessee for the purpose of reopening of the assessment beyond the period of four years is not sustainable in law. Therefore, the case of the assessee is covered by proviso to section 147 of the Income Tax Act, and the reopening being bad in law, we hereby quash the assessment order passed u/s 143(3) r.w.s 147 of the Act. The ground nos.1 2 raised by assessee are allowed.

Summary

Issues Involved:
1. Validity of reopening the assessment under Section 147 by issuing notice under Section 148.
2. Legality of the addition of 12.5% of alleged total bogus purchases.
3. Appropriateness of adding ?1,06,82,780/- to the book profit under Section 115JB for alleged bogus purchases.

Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147 by Issuing Notice under Section 148:

The assessee contested the reopening of the assessment under Section 147, arguing that the notice under Section 148 was issued after the expiry of four years from the end of the relevant assessment year, which is barred by limitation. The original assessment was completed under Section 143(3) without any addition for purchases. The assessee had disclosed all material facts necessary for the assessment during the original proceedings. The Tribunal observed that the notice for reopening was issued on 31.03.2017, beyond the four-year limitation period which ended on 31.03.2015. The Tribunal found no mention of any failure by the assessee to disclose fully and truly all material facts necessary for the assessment in the notice issued by the AO. The Tribunal cited the first proviso to Section 147 and relevant judgments, including those of the Jurisdictional High Court and the Supreme Court, to support its conclusion that the reopening was invalid due to the absence of any failure on the part of the assessee to disclose material facts. Consequently, the Tribunal quashed the assessment order passed under Section 143(3) read with Section 147.

2. Legality of the Addition of 12.5% of Alleged Total Bogus Purchases:

Given that the Tribunal quashed the assessment order on the grounds of invalid reopening, it refrained from adjudicating on the merits of the addition of 12.5% of the alleged total bogus purchases. The Tribunal noted that since the assessment was quashed, the issue of the addition no longer survived.

3. Appropriateness of Adding ?1,06,82,780/- to the Book Profit under Section 115JB for Alleged Bogus Purchases:

Similarly, the Tribunal did not adjudicate on the issue of adding ?1,06,82,780/- to the book profit under Section 115JB, as the assessment itself was quashed. The Tribunal emphasized that with the quashing of the assessment, the grounds related to the additions to book profit became moot.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, quashing the reassessment order under Section 143(3) read with Section 147 due to the invalidity of the reopening process. The grounds related to the additions were not adjudicated as the assessment was quashed. The appeal was partly allowed, with the assessment order being declared invalid and void.