2023 (6) TMI 869 - AT - Income Tax

Validity of re-assessment - original assessment order as passed u/s 143(3) r.w.s. 144C - reason to believe - HELD THAT - The reasons that re-assessment notice was issued on the basis of the same set of facts/materials which was already available and considered at the time of original assessment. Additions have been made on the basis of documents filed by the assessee i.e. audited financial statement and computation of income. A.O. in the reasons recorded in respect of each of the items/issues relied on information filed by the Assessee. In so far donation is concerned, A.O. referred to Schedule-18 Other operating expenses of the profit and loss account, in so far as provision for compensated absences , A.O. referred to the assessment records and in so far as provision for litigation and claims , A.O. has also referred to the assessment records. Thus, there it cannot be said that there was a failure on the part of the assessee to disclose fully and truly of material facts and it is found that no new tangible material came to be existence post completion of original assessment. Reopening beyond period of four years - In terms of Proviso to Section 147 of the Act, once the assessment had been completed u/s 143(3) reopening is not permissible beyond four years from the end of relevant assessment year, unless income has escaped assessment by reason of failure of the assessee to disclose fully and truly all material/primary facts necessary for the assessment. There is no material facts brought on record by the A.O. to show that the assessee had failed to disclose fully and truly all material/primary facts necessary for assessment, on the contrary, additions have been made based on the revisit of the documents filed by the assessee himself i.e. audited financial statement and computation of income. Thus, the reassessment proceedings are barred by limitation. Decided in favour of assessee.

Issues Involved:
1. Validity of reassessment proceedings under Section 147.
2. Requirement of requisite satisfaction under Section 151.
3. Limitation period for reassessment proceedings.
4. Validity of reassessment based on vague reasons.
5. Reassessment due to change of opinion.
6. Disallowance of donation expenses.
7. Disallowance of provision for compensated absences.
8. Disallowance of provision for litigation and claims.
9. Charging of interest under Sections 234B and 234D.
10. Initiation of penalty proceedings under Section 271(1)(c).

Summary:

1. Validity of Reassessment Proceedings:
The assessee argued that the reassessment proceedings initiated under Section 147 were invalid as they were based on the same set of facts available during the original assessment, thus barred by limitation. The Tribunal found that the reassessment notice was issued based on existing records and no new tangible material had come into existence post the original assessment. Hence, the reassessment proceedings were deemed barred by limitation per the proviso to Section 147.

2. Requirement of Requisite Satisfaction:
The assessee contended that the reassessment proceedings were initiated without obtaining requisite satisfaction under Section 151. The Tribunal did not specifically address this issue separately as the reassessment proceedings were already found invalid due to being barred by limitation.

3. Limitation Period:
The Tribunal emphasized that reassessment beyond four years from the end of the relevant assessment year is not permissible unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal found no such failure on the part of the assessee, thereby ruling the reassessment proceedings as barred by limitation.

4. Validity Based on Vague Reasons:
The assessee argued that the reassessment was based on vague reasons without any new material. The Tribunal noted that the reasons for reassessment were based on the same documents filed during the original assessment, thus supporting the assessee's claim.

5. Change of Opinion:
The Tribunal agreed with the assessee that the reassessment was initiated merely on a change of opinion, which is not permissible under the law.

6. Disallowance of Donation Expenses:
The Tribunal did not specifically address the disallowance of donation expenses as the reassessment proceedings themselves were found invalid.

7. Disallowance of Provision for Compensated Absences:
Similarly, the Tribunal did not address the disallowance of provision for compensated absences due to the invalidity of reassessment proceedings.

8. Disallowance of Provision for Litigation and Claims:
The Tribunal refrained from adjudicating on the disallowance of provision for litigation and claims as the reassessment proceedings were already quashed.

9. Charging of Interest:
The Tribunal did not specifically address the issue of charging interest under Sections 234B and 234D due to the invalidity of the reassessment proceedings.

10. Penalty Proceedings:
The Tribunal did not address the initiation of penalty proceedings under Section 271(1)(c) as the reassessment itself was found invalid.

Conclusion:
The Tribunal quashed the reassessment proceedings on the ground of being barred by limitation and allowed the appeal of the assessee on this point, rendering other issues academic in nature. The appeal was partly allowed.

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