2023 (9) TMI 1622 - HC - Income Tax

Validity of reassessment proceedings - Tribunal quashing proceedings as there is no failure on the part of the assessee to make true and full disclosure - HELD THAT - In light of the questions already decided in case of CIT vs. Kelvinator of India Ltd 2010 (1) TMI 11 - SUPREME COURT Tribunal found that since the reopening was on the basis of the material already available on record and there was no new tangible material available before the AO to reopen the assessment after expiry of period of four years and it was not a case where there was any failure on the part of the assessee to disclose all the material facts necessary for assessment. No fresh tangible material before the AO or the assessee failed to disclose all the material facts necessary for assessment. Hence, we hereby quash the reopening/re-assessment order being not sustainable under the law - No substantial question of law arises.

Summary

Issues:
1. Validity of quashing reassessment proceedings based on failure to make full disclosure.
2. Interpretation of Section 147 of the Income Tax Act for reopening assessments beyond four years.

Detailed Analysis:

1. The primary issue in this case was whether the Tribunal was justified in quashing the reassessment proceedings by considering the failure on the part of the assessee to make true and full disclosure. The Assessing Officer contended that the assessee had debited an amount towards the profit on the sale of a depreciable asset, which should have been added back while computing total income. The CIT(Appeals) confirmed this view, but the Tribunal partially allowed the appeal, citing that the Assessing Officer's reason to believe was based on the same set of documents, amounting to a change of opinion, which is impermissible under Section 147 of the Act. The Tribunal referred to the judgment in CIT vs. Kalvinator of India Ltd, emphasizing the need for tangible material to support reopening assessments beyond the concept of change of opinion.

2. The second issue revolved around the interpretation of Section 147 of the Income Tax Act concerning the reopening of assessments beyond four years. The Tribunal, relying on the Supreme Court judgment in CIT vs. Kelvinator of India Ltd, highlighted that for reopening assessments after the expiry of four years, there must be a failure on the part of the assessee to disclose all material facts necessary for assessment. The Tribunal also referred to the order of the Hon'ble Gujarat High Court in a previous case, emphasizing the conditions precedent for issuing a notice for reassessment beyond four years. It was concluded that there was no fresh tangible material before the Assessing Officer, and the assessee did not fail to disclose all material facts necessary for assessment, leading to the quashing of the reopening/reassessment order as unsustainable under the law.

In summary, the judgment addressed the validity of quashing reassessment proceedings based on the failure to make full disclosure and provided a detailed interpretation of Section 147 of the Income Tax Act for reopening assessments beyond four years. The Tribunal's decision was influenced by previous legal precedents emphasizing the need for tangible material and full disclosure by the assessee to support the reopening of assessments, ultimately leading to the dismissal of the appeal.