2023 (8) TMI 1612 - AT - Income Tax

Reopening of assessment u/s 147 - reason to believe - notice after 4 years from the end of the assessment year - HELD THAT - As the assessee already filed return of income u/s 139(1) of the Act it is to be seen as to whether the assessee failed to disclose truly and fully all material facts necessary for the purpose of making assessment. No such recording of satisfaction is available that escapement of income has arisen due to failure on the part of the appellant and in the absence of fulfillment of proviso to Section 147 of the Act reopening after 4 years from the end of relevant assessment year is bad in law and liable to be quashed as the case made out by the assessee is acceptable or not. Upon perusal of the relevant materials available before us we find that as the precondition for initiation of proceeding u/s 147 by recording reasons of income escaping assessment is not reflecting from the said order of reopening due to the failure on the part of the assessee the same is not found to be sustainable and hence liable to set aside. Neither any allegation has been labelled against the assessee by the Ld. AO while reopening assessment under Section 148 of the Act in failing to disclose fully or truly all material facts necessary for assessment which admittedly goes against such reopening of assessment by the department. No recording of reasons of the fact of failure on the part of the appellant in submitting material facts for the purpose of making assessment truly and fully at the time of original assessment is reflecting for initiation of such re-assessment proceeding. Once upon considering the documents the claim of the assessee decided and accepted by not making any addition during the course of regular assessment issuing notice u/s 148 on the same issue by successor AO amongst to assumption of revisionary power which is not valid as per law. When the AO attempts to reopen an assessment on the count the opinion formed earlier by him was an incorrect opinion the reopening is not warranted. Reopening of assessment beyond the period of 4 years not sustainable - Decided in favour of assessee.

Summary

The judgment from the Appellate Tribunal ITAT Ahmedabad addresses two appeals filed by the Revenue against orders from the Commissioner of Income Tax (Appeals) and the National Faceless Appeal Centre, concerning reassessment proceedings initiated under Section 148 of the Income Tax Act for Assessment Years 2008-09 and 2012-13. The core issues revolve around the validity of the reassessment proceedings, particularly whether they were based on a mere change of opinion and whether the conditions for reopening assessments beyond four years were met.

1. Issues Presented and Considered

The primary legal issues considered were:

• Whether the reassessment proceedings initiated under Section 148 were valid, given the claim of a change of opinion by the Revenue.
• Whether the conditions for reopening an assessment beyond four years, as specified in the proviso to Section 147, were satisfied.
• Whether the reassessment proceedings were initiated based on new material facts or merely on a reappraisal of existing materials.

2. Issue-Wise Detailed Analysis

Validity of Reassessment Proceedings:

• Legal Framework and Precedents: Section 147 of the Income Tax Act allows for reassessment if income has escaped assessment. However, the proviso requires that if the reassessment is beyond four years, it must be due to the assessee's failure to disclose fully and truly all material facts.
• Court's Interpretation and Reasoning: The Tribunal emphasized that reassessment proceedings cannot be initiated based on a mere change of opinion. It cited several precedents where courts have held that reopening an assessment on the same set of facts, without new material, constitutes a change of opinion and is invalid.
• Key Evidence and Findings: The Tribunal found that the Assessing Officer (AO) had relied on the same materials available during the original assessment and had not brought any new facts to light.
• Application of Law to Facts: The Tribunal applied the legal principles to the facts, noting that the AO had not demonstrated any failure by the assessee to disclose material facts fully and truly. The reasons recorded for reopening did not allege any such failure.
• Treatment of Competing Arguments: The Tribunal considered the Revenue's argument that the reassessment was justified but found it lacking due to the absence of new material facts and the failure to meet the conditions of the proviso to Section 147.
• Conclusions: The Tribunal concluded that the reassessment proceedings were invalid due to the absence of new material facts and the initiation based on a change of opinion.

Reopening Beyond Four Years:

• Legal Framework and Precedents: The proviso to Section 147 requires that for reassessment beyond four years, the escapement of income must be due to the assessee's failure to disclose fully and truly all material facts.
• Court's Interpretation and Reasoning: The Tribunal noted that the AO's reasons for reopening did not mention any such failure by the assessee. The Tribunal referenced several judicial decisions supporting the requirement of a clear failure to disclose for reopening beyond four years.
• Key Evidence and Findings: The Tribunal found no evidence of any failure by the assessee to disclose material facts fully and truly in the original assessment.
• Application of Law to Facts: The Tribunal applied the legal standard, finding that the absence of any allegation of failure to disclose in the recorded reasons rendered the reopening invalid.
• Treatment of Competing Arguments: The Tribunal found the Revenue's arguments insufficient to justify the reopening, given the lack of new material and the absence of any failure to disclose by the assessee.
• Conclusions: The Tribunal concluded that the reassessment proceedings were invalid as they did not meet the statutory requirements for reopening beyond four years.

3. Significant Holdings

• Verbatim Quotes of Crucial Legal Reasoning: The Tribunal stated, "The AO considered the material facts which were available at the time of original assessment for the purpose of reopening and the reasons recorded do not exhibit the fact of failure of the appellant in submitting material facts for the assessment truly and fully at the time of original assessment."
• Core Principles Established: The Tribunal reinforced the principle that reassessment based on a change of opinion is invalid and that reopening beyond four years requires a clear failure to disclose material facts by the assessee.
• Final Determinations on Each Issue: The Tribunal determined that the reassessment proceedings were invalid due to both the change of opinion and the failure to meet the conditions for reopening beyond four years.

The Tribunal dismissed both appeals filed by the Revenue, affirming the decisions of the lower authorities that the reassessment proceedings were invalid.