2023 (1) TMI 1390 - HC - Income Tax

Validity of reopening of assessment - addition made on the basis of disallowance claimed on account of Provision of VAT - Tribunal on going through the reasons for reopening recorded the findings on fact that there was no allegation made by the assessing officer that there was failure on the part of the assessee to truly and validly disclose material facts necessary for the assessment - HELD THAT - From the perused the reasons as evidently clear that material already available in the books of accounts have been re-apprised by the assessing officer and notice u/s 148 has been issued. The manner of such reopening has been frowned upon in several decisions as the fundamental principles of law is that the reason should disclose failure on the part of the assessee to truly and validly disclose material facts necessary for the assessment. In the absence of any such allegations against the assessee the Tribunal was fully justified in re-appreciating the fact and coming to the conclusion that the reopening of the assessment was bad in law. Thus we find that there is no substantial questions of law arising for consideration in this appeal.

Summary

Issues:
1. Validity of reopening of assessment under Section 148 of the Income Tax Act, 1961.
2. Whether the Tribunal exceeded its jurisdiction in quashing the assessment order.
3. Allegations of failure on the part of the assessee to disclose material facts for assessment.

Issue 1: Validity of Reopening of Assessment under Section 148:
The appeal filed under Section 260A of the Income Tax Act, 1961 challenged the order of the Income Tax Appellate Tribunal regarding the reopening of assessment for the assessment year 2008-2009. The Court examined whether the reopening was validly done. The Tribunal found that there was no allegation of failure by the assessee to disclose material facts necessary for assessment. The Court reviewed the reasons for reopening and noted that the assessing officer re-appraised material already available in the books of accounts. The Court emphasized that the reason for reopening should disclose failure on the part of the assessee to truly and validly disclose material facts. As there were no such allegations against the assessee, the Tribunal's decision to quash the reopening of assessment was upheld, leading to the dismissal of the appeal.

Issue 2: Tribunal's Jurisdiction in Quashing Assessment Order:
The appellant raised concerns about the Tribunal exceeding its jurisdiction in quashing the assessment order. However, the Court observed that the Tribunal's decision was based on the absence of allegations regarding the failure of the assessee to disclose material facts necessary for assessment. The Court emphasized that the Tribunal was justified in re-evaluating the facts and concluding that the reopening of assessment was not valid in law. Consequently, the Court found no substantial questions of law arising for consideration in the appeal, leading to the dismissal of the appeal.

Issue 3: Allegations of Failure to Disclose Material Facts:
One of the substantial questions raised was whether the assessee failed to disclose material facts necessary for assessment. The Court noted that the reasons for reopening did not contain any allegations of such failure on the part of the assessee. The Court highlighted that the fundamental principle of law requires the reason for reopening to demonstrate the failure to disclose material facts. As there were no such allegations against the assessee, the Tribunal's decision to quash the reopening of assessment was deemed appropriate, resulting in the appeal being dismissed.

In conclusion, the High Court of Calcutta, in a detailed analysis, upheld the Tribunal's decision to quash the reopening of assessment due to the absence of allegations of failure by the assessee to disclose material facts. The Court emphasized the importance of reasons for reopening reflecting such failure and found no substantial questions of law in the appeal. Consequently, the appeal was dismissed, and the application was closed.