2022 (8) TMI 187 - AT - Income Tax

Reopening of assessment u/s 147 - Eligibility of reasons to believe - HELD THAT - The reasons recorded must speak for itself. The mandatory jurisdictional requirement in terms of 1st proviso to Section 147 will not be deemed to have been fulfilled if the reasons did not themselves clearly indicate that there was, in fact, a failure by the assessee to make full and true disclosure of all material facts. The reasons have to explain what material was not disclosed by the assessee which the assessee ought to have disclosed in the instant case. This should be apparent from the reading of the reasons itself. Similar view has been expressed in BPTP Ltd. vs. Principal Commissioner of Income Tax 2020 (1) TMI 56 - DELHI HIGH COURT - SLP filed against which was dismissed by the Hon'ble Supreme Court 2021 (3) TMI 702 - SC ORDER - The Hon'ble Delhi High Court in Oracle India Pvt. Ltd. 2017 (7) TMI 967 - DELHI HIGH COURT also echoed the same view earlier. Assessee appeal allowed. AO has plainly overlooked the jurisdictional requirement in terms of 1st proviso to Section 147 of the Act. The jurisdiction assumed under Section 147 in this backdrop is ex facie vitiated and thus requires to be struck down at the threshold. The sanction granted by the CIT. also cannot be said to be in accord with Section 151 of the Act and thus vitiates the assumption of jurisdiction. The impugned consequential assessment framed under Section 147 r.w. Section 143(3) is clearly bad in law in the absence of any valid jurisdiction. As a corollary, the impugned assessment order dated 30.12.2016 framed in pursuance of non est jurisdiction stands quashed. - Decided in favour of assessee.

Summary

Issues involved:
1. Validity of reopening assessment under Section 147 beyond four years.
2. Alleged errors in assessment order and reassessment proceedings.

Issue 1: Validity of reopening assessment under Section 147 beyond four years:

The appeal was filed against the order of the Commissioner of Income Tax (Appeals) concerning the assessment order dated 30.12.2016 passed by the Assessing Officer under Section 143(3) r.w. Section 147 of the Income Tax Act, 1961 for AY 2010-11. The assessee challenged the reopening of the assessment, contending that the Assessing Officer did not comply with the prerequisites of the 1st proviso to Section 147 of the Act. The reasons for reopening included issues related to accumulated surplus, depreciation, and cash deposits. The reasons recorded did not allege any failure by the assessee to disclose all material facts necessary for assessment, a foundational condition for invoking Section 147 beyond four years. The jurisdiction under Section 147 was exercised without satisfying the conditions of the 1st proviso, making it time-barred. The Hon'ble Jurisdictional High Court and other courts have emphasized that the reasons recorded must clearly indicate a failure to disclose material facts by the assessee. The reopening in this case was deemed to be vitiated due to non-compliance with jurisdictional requirements, and the consequential assessment was quashed.

Issue 2: Alleged errors in assessment order and reassessment proceedings:

The grounds of appeal raised by the assessee included errors in the initiation of reassessment proceedings, confirmation of assessment order making additions on fresh grounds, and reduction of the application amount in reassessment. The Ld. counsel for the assessee argued against the legality of reassessment proceedings and the additions made. The Ld. Sr. DR for the Revenue supported the action of the lower authorities. The reassessment proceedings were challenged on various grounds, including lack of jurisdiction, illegality, and violation of natural justice principles. However, due to the finding that the reopening of the assessment was time-barred and lacked valid jurisdiction, it was not deemed necessary to delve into the merits of the additions/disallowances made during the reassessment. Consequently, the appeal of the assessee was allowed, and the impugned assessment order was quashed.

This detailed analysis of the legal judgment highlights the issues related to the validity of reopening assessments under Section 147 beyond four years and the alleged errors in the assessment order and reassessment proceedings. The judgment emphasizes the importance of complying with jurisdictional requirements and the need for reasons recorded to clearly indicate failures in disclosing material facts by the assessee.