2018 (9) TMI 2151 - AT - Income Tax

Reopening of assessment - reasons to believe - denial of Deduction u/s. 80IA - notice after expiry of 4 years - disallowance of the claim of assessee in respect of Bus Shelter and Foot Overbridge expenditure - HELD THAT - While recording Reasons , it is incumbent upon the AO to firstly make an allegation in the Reasons recorded and then also to make out a case that there was a failure on the part of the assessee in disclosing fully and truly all material facts necessary for his assessment for the impugned assessment year. Perusal of the Reasons recorded by the AO reveals that no such allegation has been made in the Reasons . Nothing has been recorded by the AO in the Reasons about any failure on the part of the assessee to disclose fully and truly all material facts necessary for the framing of original assessment. It has nowhere been mentioned by the AO which fact or material was not disclosed by the assessee. Thus, vital link between Reasons and his findings has not been established by him. This vital link is the safeguard against arbitrary reopening of the concluded assessment. The Reasons recorded cannot be supplemented by way of further observations in the assessment order or in any other manner. The validity of the reopening can be examined on the basis of Reasons alone and not in supplementary material. Reopening has been done without complying with the mandatory jurisdictional condition precedent as stipulated in first proviso to section 147. Thus, reopening is invalid on this ground and the CIT (A) rightly decided this legal issue challenged before him We concur with the CIT (A) that the AO without satisfying the jurisdictional pre-condition as stipulated in the first proviso to sec. 147 of the Act lacks jurisdiction to reopen the original assessment completed u/s. 143(3) after four years. Therefore, all proceeding subsequently made is null in the eyes of law and so, Ld. CIT (A) rightly annulled the reopening of regular assessment u/s. 148/147 and subsequent reassessment order of the AO is, therefore, null in the eyes of law. Decided against revenue.

Summary

Issues Involved:

1. Legality of the reopening of the assessment under Section 147 of the Income Tax Act, 1961.
2. Allowance of deduction under Section 80IA of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Legality of the Reopening of the Assessment:

The primary issue in this appeal was the legality of the reopening of the assessment under Section 147 of the Income Tax Act, 1961. The original assessment was completed under Section 143(3) on 26.12.2008. The Assessing Officer (AO) issued a notice under Section 148 on 26.02.2013, intending to reopen the assessment. The reopening was challenged on the grounds that it was initiated after the expiry of four years from the end of the relevant assessment year without establishing the assessee's failure to disclose fully and truly all material facts necessary for the assessment.

The Tribunal noted that the proviso to Section 147 stipulates that no action can be taken after four years unless the income chargeable to tax has escaped assessment due to the assessee's failure to disclose material facts. The Tribunal emphasized that the reasons recorded by the AO must explicitly state which facts were not disclosed by the assessee. In this case, the reasons did not contain any allegation of such failure by the assessee. Citing the Bombay High Court's decision in Hindustan Lever Ltd. Vs. ACIT, the Tribunal highlighted that reasons must be clear, unambiguous, and self-explanatory, providing a vital link between the reasons and evidence.

The Tribunal concluded that the AO failed to satisfy the jurisdictional pre-condition of recording reasons indicating the assessee's failure to disclose material facts. Therefore, the reopening was deemed invalid, and the proceedings were annulled. The Tribunal upheld the decision of the CIT(A) to annul the reassessment order, finding that the AO lacked jurisdiction to reopen the assessment after four years.

2. Allowance of Deduction under Section 80IA:

The second issue was regarding the allowance of deduction under Section 80IA of the Income Tax Act, 1961. The assessee had claimed deductions for developing and operating infrastructure facilities, including 'Bus shelters,' 'Road median,' and 'Foot over bridge.' Initially, the AO had allowed the deduction for 'Road median' but disallowed it for 'Bus shelters' and 'Foot over bridge.'

Upon reopening, the AO disallowed the deduction for 'Road median' as well, arguing that the infrastructure facilities were not new and that the assessee's revenue was primarily from advertising, not from developing or maintaining infrastructure. The CIT(A) had allowed the deduction, and the Tribunal found that the merits of the additions became academic due to the annulment of the reopening.

Since the legal issue regarding the reopening was decided in favor of the assessee, the Tribunal did not delve into the merits of the deduction claim under Section 80IA, rendering the Revenue's challenge on this ground moot. Consequently, the appeal by the Revenue was dismissed.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to annul the reopening of the assessment under Section 147 due to non-compliance with jurisdictional requirements. The issue of deduction under Section 80IA was not addressed on merits, as the legal issue of reopening was resolved in favor of the assessee. The order was pronounced in open court on 26/09/2018.