2024 (6) TMI 565 - AT - Income Tax

Reopening of assessment u/s 147 - Notice issued after the expiry of 4 years - unexplained cash deposits - HELD THAT - Since the appellant has disclosed the disputed cash deposits in his saving bank maintained with Axis Bank Ltd in the Balance sheet and profit and loss account filed with the return of income for the relevant assessment year and duly considered by the AO while passing the Assessment order u/s 143(3) dated 12/12/2011. AO ought to have examined the information received in the context of the material facts disclosed by the appellant on record. If such an exercise would have been done it is most likely that the AO would have come to the conclusion that there was no failure on the part of the appellant to disclose truly and fully all material facts necessary for assessment. Thus the entire proceedings in the present case would be hit by 1st proviso to section 147 which bars any reopening after the expiry of four years where assessment under section 143(3) has been completed unless there was failure to disclose material facts truly and fully. In the instant case from the reasons recorded it is revealed that there was no allegation in the reasons recorded that there was any failure on the part of assessee to truly and fully disclose all material facts necessary for its assessment for the relevant assessment year. In our view such an assessment order passed u/s 147 and confirmed by the CIT(A) is bad in law and deserves to be quashed. Apex Court in Canara Bank 2023 (9) TMI 1043 - SC ORDER has dismissed SLP filed against the order of the High Court where it was held that where notice u/s 148 is to be issued after expiry of four years or before expiry of six years assessee should have failed to disclose material facts hence where AO had not even stated or alleged that there was failure on part of assessee to disclose fully and truly all material facts in respect of claim of deduction under section 36(1)(viia) Tribunal rightly held that reopening assessment initiated beyond four years was bad in law - Whether SLP filed by revenue against said impugned order was to be dismissed. Similarly the Hon ble Jurisdictional High Court in the case of State Bank of Patiala 2015 (5) TMI 872 - PUNJAB HARYANA HIGH COURT observed that reasons for opening assessment which had already been concluded did not show that there was any failure on part of assessee to disclose fully and truly all material facts and thus it was merely a change of opinion and reassessment was not justified. We hold that the AO has acted solely on basis of information and material already on record in original assessment and therefore the impugned reopening notice issued beyond period of four years was illegal. We therefore hold that the assessment order passed by the AO as bad in law and as such same is quashed. Appeal of assessee allowed.

Summary

Issues:
Validity of notice issued u/s 148 and assessment order passed u/s 147r.w.s. 143(3) challenged as bad in law.

Analysis:
The appellant filed appeals against the order of the National Faceless Appeal Centre challenging the validity of notice issued u/s 148 and assessment order passed u/s 147r.w.s. 143(3) for the Assessment Year 2008-09. The appellant's return was filed u/s 44AF at an income of Rs 1,05,670 by applying 5% profit on the total turnover. The assessment was completed at an income of Rs. 39,66,365, which was later deleted by Ld. CIT (A) as time-barred. The assessment was reopened based on cash deposits in the appellant's saving bank account, leading to an addition of Rs. 38,60,965 as unexplained cash credits.

The appellant argued that the notice issued u/s 148 was invalid as the saving bank account was disclosed in the balance sheet and P&L account during scrutiny assessment u/s 143(3). The appellant contended that the Assessing Officer acted on information already considered during the original assessment, making the notice invalid under the 1st proviso to section 147. The appellant cited relevant case laws to support the argument that reopening beyond four years without failure to disclose material facts is bad in law.

The Tribunal noted that the notice u/s 148 was issued after four years from the relevant assessment year, where the appellant had disclosed the disputed cash deposits in the balance sheet and profit and loss account filed with the return of income. The Tribunal held that there was no failure on the part of the appellant to disclose material facts necessary for assessment, rendering the assessment order passed u/s 147 as bad in law.

Referring to case laws, the Tribunal emphasized that reopening assessments beyond four years without any failure to disclose material facts is unjustified. The Tribunal concluded that the AO acted solely on information already on record, making the reopening notice illegal. Consequently, the assessment order was quashed, rendering the penalty under section 271(1)(c) infructuous.

In conclusion, both appeals filed by the appellant were allowed, and the assessment order was quashed as being bad in law, leading to the penalty becoming infructuous.