2023 (8) TMI 1176 - AT - Income Tax

Reopening of assessment u/s 147 - foreign travel expenses - reopening beyond period of 4 years - HELD THAT - We observe from the record that the original assessment u/s. 143(3) was completed on 22.11.2011 and we also observed that assessee has filed all the relevant information before the then AO. It is also fact on record that the issue involved is relating to AY 2009-10 and the notice was issued for reopening of assessment only on 28.03.2016. As clearly reopened beyond four years and we also observed that CIT(A) has dismissed the ground of the assessee filed before him with the observation that the case of the assessee is covered by the main provision and not proviso. The observation of the CIT(A) is against the fact on record and we observe that the issue involved in the present case is falls under the first proviso to section 147. Therefore, as per the proviso to section 147 two conditions are required to be satisfied firstly, the Assessing Officer must have reason to believe that income chargeable to income tax has escaped assessment and secondly he must also have reason to believe that such escapement has occurred by reason of omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that assessment year. Since in the present case proviso to section 147 is applicable, AO has to bring on record both the above said conditions on record. Since the AO has not brought on record how the escapement of income has occurred by reason of omission or failure on the part of the assessee to disclose fully or truly all material facts necessary of the assessment, therefore the reopening of assessment is bad in law. The assessment passed u/s.143(3) r.w.s. 147 is bad in law and it is quashed. Decided in favour of assessee.

Summary

Issues involved:
The issues involved in the judgment are the reopening of assessment beyond the prescribed period and the disallowance of foreign travel expenses and advances written off.

Reopening of assessment:
The appeal was filed against the order of the Learned Commissioner of Income Tax (Appeals) for the assessment year 2009-10. The original return of income was filed by the assessee, declaring total income, which was later reassessed by the Assessing Officer through a notice issued under section 148 of the Income-tax Act, 1961. The reasons for reopening included disallowances made in the previous assessment, such as interest income, disallowance under section 14A, and certain expenses like advances written off and foreign travel expenses. The Assessing Officer proceeded with the reassessment despite no objections raised by the assessee. The main contention was the validity of reopening the assessment beyond the four-year period.

Disallowance of foreign travel expenses and advances written off:
The Assessing Officer disallowed the foreign travel expenses and advances written off by the assessee. The assessee claimed that the foreign travel expenses were incurred for business purposes, providing detailed submissions regarding the trips made by the Directors. However, the Assessing Officer found a lack of supporting documents and justification for these expenses, leading to disallowance. Similarly, the advances written off were claimed to be related to the business, but the Assessing Officer disallowed them due to insufficient evidence showing that they were on revenue account. The Commissioner of Income Tax (Appeals) sustained the disallowance of foreign travel expenses but allowed the ground raised by the assessee regarding advances written off. The final judgment by the Appellate Tribunal quashed the reassessment, stating that the reopening of assessment was beyond the prescribed period and lacked sufficient reasons to believe that income had escaped assessment due to the assessee's failure to disclose material facts.

Conclusion:
The Appellate Tribunal allowed the appeal filed by the assessee, declaring the reassessment as invalid due to being beyond the prescribed period and lacking proper justification for the reopening. The disallowance of foreign travel expenses and advances written off was a significant part of the case, with the Tribunal ultimately ruling in favor of the assessee based on the legal provisions and evidence presented.