2021 (12) TMI 877 - AT - Income Tax

Reopening of assessment u/s 147 - taxation as fees for technical services at the rate of 10% under Article 12 of the India Sweden DTAA - HELD THAT - On going through the relevant material on record, it becomes emphatically clear that the assessee disclosed fully and truly all material facts necessary for the assessment during the course of original proceedings completed u/s.143(3) and there was nothing which was withheld by it. What inference the AO draws from the material placed before him is a secondary question and matter of concern for the Department only. Insofar as the proviso to section 147 is concerned, the same gets immediately magnetized when it is proved that the original assessment was completed u/s.143(3) and a period of four years has elapsed form the end of the relevant assessment year and further there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Adverting to the facts of the instant case, we find that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment completed u/s. 143(3). Since the period of four years from the end of the relevant assessment year expired at the time when the AO issued notice u/s. 148, we hold that such a notice and the consequential assessment order are bad in law and hence vitiated. A.Y. 2013-14 - Proviso to section 147 mandates that no reassessment can take place after four years from the end of the relevant assessment year when the original assessment was completed u/s. 143(3) and there is no failure on the part of the assessee to disclose fully and truly all material facts necessary facts for reassessment. Here again, we find that the AO inquired about the amounts received by the assessee not offered for taxation during the course of original assessment proceedings by means of a notice u/s. 142(1) of the Act. The assessee furnished details of income of ₹ 9.26 crore not offered for taxation in its reply with the necessary justification. As evident that the AO initiated reassessment proceedings by means of notice u/s. 148 dated 29-03-2019 after four years from the end of the relevant assessment year when the original assessment was completed u/s. 143(3) and there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment - we quash the notice u/s. 148 and the consequential assessment order - Decided in favour of assessee.

Issues Involved:
1. Initiation of reassessment proceedings after four years from the end of the relevant assessment year.
2. Failure of the assessee to disclose fully and truly all material facts necessary for assessment.

Issue-wise Detailed Analysis:

1. Initiation of Reassessment Proceedings After Four Years:

For A.Y. 2012-13, the assessee, a foreign company, filed its return declaring total income of ?1,89,73,041/- on 12-03-2014. The assessment under section 143(3) of the Income-tax Act, 1961, was completed on 28-03-2016. Subsequently, the Assessing Officer (AO) issued a notice under section 148 on 29-03-2019, beyond the four-year period stipulated by the first proviso to section 147. The AO aimed to charge a sum of ?7,81,23,918/- that was initially accepted as non-taxable. The Tribunal found that the AO had conducted an inquiry during the original assessment, and the assessee had provided detailed submissions justifying the non-taxability of the amount. The Tribunal noted that the AO had accepted the assessee's explanations during the original assessment, and thus, there was no failure on the part of the assessee to disclose fully and truly all material facts. Consequently, the reassessment proceedings initiated after four years were deemed invalid.

For A.Y. 2013-14, the situation was similar. The assessee filed its return declaring total income of ?1,83,93,865/-, and the original assessment was completed on 28-03-2016. The AO issued a notice under section 148 on 29-03-2019, again beyond the four-year period. The AO sought to include a sum of ?9,26,60,482/- that was initially declared as non-taxable. The Tribunal observed that the AO had inquired about the non-taxable amounts during the original assessment, and the assessee had provided necessary details and justifications. Since there was no failure on the part of the assessee to disclose fully and truly all material facts, the reassessment proceedings were quashed as invalid.

2. Failure to Disclose Fully and Truly All Material Facts:

In both assessment years, the Tribunal emphasized the requirement under the first proviso to section 147, which mandates that no action for reassessment can be taken after four years from the end of the relevant assessment year unless the income chargeable to tax has escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The Tribunal found that the assessee had disclosed all necessary details during the original assessments, and the AO had accepted these details after conducting inquiries. The AO's reasons for reopening the assessments were based on the assertion that the assessee did not furnish supporting documents during the original proceedings. However, the Tribunal concluded that the assessee had provided sufficient details and explanations, and any further inference was a matter of the AO's interpretation, not the assessee's failure to disclose.

Conclusion:

The Tribunal quashed the reassessment proceedings for both assessment years, holding that the notices under section 148 and the consequential assessment orders were invalid due to the expiry of the four-year period and the absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.

Order:

Both appeals were allowed, and the reassessment proceedings and consequential assessment orders were declared invalid. The order was pronounced in the Open Court on 09 December, 2021.

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