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2023 (6) TMI 521 - AT - Income TaxReopening of assessment u/s 147 - Proper reasoning - reopening beyond four years from the end of the relevant A.Y. - Disallowance u/s 37(1) for payment of professional fees - HELD THAT - As per the relevant provisions, the AO is bound to show that there was failure on the part of the assessee to fully and truly disclose all material facts necessary for its assessment. The payment of Rs. 25 lakhs to Sanyals was towards liasoning done by them in furtherance of the contract work of the assessee. A bare perusal of the reasons mentioned hereinabove do not even allege that there has been a failure on the part of the assessee to disclose any material facts. The claim of expenditure was made and was thoroughly examined during the original assessment proceedings. In our considered opinion, whether the claim of expenditure is for legitimate needs of business expediency cannot be questioned in the reassessment proceedings. As decided in E.I. Dupont India P Ltd 2013 (2) TMI 406 - DELHI HIGH COURT Failure to disclose all material facts necessary for assessment is a condition precedent for reopening of an assessment beyond the period of four years from the date of assessment. This is a pre-condition set out in the statute itself. Merely by adding a line in the reasons recorded by the Assessing Officer that the assessee had failed to disclose fully and truly all material facts, requirement of proviso to section 147 of the Act would not be satisfied for the purpose of reopening of the assessment u/s 147 - No merit in the reopening of the assessment - Decided in favour of assessee.
Issues involved:
1. Whether the assumption of jurisdiction in reopening the assessment under Section 147 was valid. 2. Whether the assessment order dated 10.03.2022 was valid given the procedural requirements. 3. Whether the disallowance of Rs. 25 lakhs under Section 37(1) was justified. Summary: 1. Assumption of Jurisdiction in Reopening the Assessment under Section 147: The assessee contended that the reopening of the assessment and the passing of the impugned order under Section 147 were bad in law as the statutory conditions stipulated under Sections 147 to 151 were not complied with. The Tribunal noted that the reopening of the assessment was after four years from the end of the relevant assessment year. As per the relevant provisions, the Assessing Officer (AO) is bound to show that there was a failure on the part of the assessee to fully and truly disclose all material facts necessary for its assessment. The reasons recorded for reopening did not allege any such failure. Citing the judgment of the Hon'ble Jurisdictional High Court of Delhi in the case of E.I. Dupont India [P] Ltd 351 ITR 299, the Tribunal held that the reopening was invalid as the pre-condition set out in the statute was not satisfied. 2. Validity of the Assessment Order Dated 10.03.2022: The Tribunal observed that the AO issued the notice under Section 148 on 05.02.2021 and supplied the reasons for reopening on 17.02.2022. The assessee raised objections on 18.02.2022, which were disposed of on 02.03.2022, and the assessment was framed on 10.03.2022, i.e., a week later. This action was against the ratio laid down by the Hon'ble Bombay High Court in the case of Asian Paints 296 ITR 90, which mandates that if the AO does not accept the objections filed by the assessee, he shall not proceed further in the matter for a period of four weeks from the date of service of the order rejecting the objections. The Tribunal, following the decision of the Hon'ble Bombay High Court and the Co-ordinate Benches, quashed the assessment order dated 10.03.2022 framed under Section 147 read with Section 143(3). 3. Disallowance of Rs. 25 Lakhs under Section 37(1): The assessee's claim of expenditure of Rs. 25 lakhs was towards liaisoning done by Sanyals in furtherance of the contract work. The Tribunal noted that the claim of expenditure was thoroughly examined during the original assessment proceedings. It held that whether the claim of expenditure is for legitimate needs of business expediency cannot be questioned in the reassessment proceedings. The Tribunal, considering the facts of the case and the reasons recorded for reopening, found no merit in the revenue's case and allowed the assessee's appeal on merits. Conclusion: The appeal of the assessee was allowed, and the assessment order dated 10.03.2022 was quashed. The Tribunal found that the reopening of the assessment under Section 147 was invalid and that the disallowance of Rs. 25 lakhs under Section 37(1) was unjustified. The order was pronounced in the open court on 09.06.2023.
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