2021 (12) TMI 812 - AT - Income Tax

Reopening of assessment u/s 147 - AO initiated the reassessment proceedings by means of a notice u/s.148 opining that the assessee violated provisions of section 13(1)(c)(ii) and 13(2)(b) - HELD THAT - Assessment in this case was originally completed u/s.143(3) of the Act on 31-12-2008. The initiation of re-assessment proceedings by means of a notice u/s.148 has taken place by virtue of a notice issued to the assessee on 31-03-2014. Proviso to section 147 states that where an assessment under sub-section (3) of section 143 has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment by reason of any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for that assessment year. The condition precedent for taking action u/s.147 after four years from the end of the relevant assessment year where the original assessment was completed u/s.143(3), is that there must be failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. It is only when there is such a failure on the part of the assessee and further the reasons recorded by the AO for initiating the re-assessment proceedings refer to such fact of the failure that a valid initiation of re-assessment can take place. We are confronted with a situation in which the original assessment was completed u/s.143(3). Period of four years from the end of the relevant assessment year 2007-08 under consideration expires on 31-03-2012. Notice u/s.148 in this case was issued on 31-03-2014. As the proviso to section 147 is attracted in this case and the reasons recorded by the AO do not refer to any failure on the part of the assessee to disclose fully and truly all material facts necessary for reassessment, we are satisfied that the ld. CIT(A) committed no mistake in setting aside the reassessment on this preliminary legal score - Appeal of assessee allowed.

Summary

Issues:
Validity of notice u/s.148 of the Income-tax Act, 1961.

Analysis:
The appeal was filed by the Revenue against the order passed by the CIT(A)-10, Pune for the Assessment Year 2007-08. The Revenue's grievance was against the notice u/s.148 being held as bad in law by the CIT(A). The assessee had filed the return of income declaring total income, which was accepted in the original assessment u/s.143(3) of the Act. The reassessment proceedings were initiated by the AO based on the violation of certain provisions by the assessee related to rental income. The AO denied the exemption u/s.11 and computed the total income. However, the CIT(A) quashed the reassessment observing that there was no new material gathered by the AO and the reassessment was initiated after the completion of the original assessment. The Tribunal upheld the CIT(A)'s decision, stating that there was no failure on the part of the assessee to disclose all material facts necessary for reassessment, as required by the proviso to section 147. Since the reasons recorded by the AO did not refer to any such failure, the reassessment was set aside.

The initiation of reassessment proceedings was challenged by the Revenue, arguing that the notice u/s.148 was valid. The AO's reasons for reopening the assessment referred to the violation of provisions by the assessee related to rental income from letting out shops to trustees and other tenants. However, the Tribunal noted that the reasons did not specifically mention any failure on the part of the assessee to disclose material facts necessary for assessment. The Tribunal emphasized that for a valid reassessment after four years from the original assessment, there must be a failure to disclose material facts by the assessee, as per the proviso to section 147. Since the reasons did not establish such a failure, the reassessment was deemed invalid. Therefore, the Tribunal upheld the CIT(A)'s decision to quash the reassessment, as the legal requirements for valid reassessment were not met.

In conclusion, the Tribunal dismissed the appeal by the Revenue, affirming the decision of the CIT(A) to set aside the reassessment proceedings. The Tribunal found that the notice u/s.148 was not valid as there was no failure on the part of the assessee to disclose material facts necessary for reassessment. The original assessment having been completed u/s.143(3), the reassessment initiated after four years lacked legal grounds and was rightfully quashed.