2024 (7) TMI 951 - AT - Income Tax

Reopening of assessment u/s. 147 - case reopened on some ITBA data base where the parties from whom assessee had made purchases were found to be non-filer of GST and simply based on this information, assessment has been reopened u/s. 148 - addition on account of purchases which already stood examined earlier as it is part of the trading amount - HELD THAT - Here in this case there is no document or evidence revealing income chargeable to tax, represent in the form of an asset. AO has sought to reopen is to disallow the purchases made by the assessee which is an item of a trading account duly reflected in the books and also the quantity of sale of purchases have been accepted alongwith gross profit in the original assessment order u/s. 143(3) dated 20/03/2016. Thus, even under the terms of first proviso to Section 147 as was then applicable, no reopening can be done after expiry of four years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for the reasons of the failure on the part of the assessee to disclose truly and wholly all material facts necessary for the assessment. Here, there is no such failure on the part of the assessee. Accordingly, in terms of time limit provided in Section 149 and first proviso to Section 147, the reopening itself is bad in law and same is quashed. Accordingly, the entire assessment order is quashed. Appeal of the assessee is allowed.

Summary

Issues:
Reopening of assessment u/s. 147 for A.Y. 2013-14 based on non-filer entities and unexplained purchases.

Analysis:
The appeal was filed against an order passed by NFAC, Delhi for the quantum of assessment u/s. 147 for the A.Y. 2013-14. The assessee did not appear, and the appeal was decided based on the material on record and orders of the authorities below. The ld. CIT(A) dismissed the appeal due to non-compliance with notices from NFAC module, leading to the appeal's dismissal for want of prosecution.

The assessee, a builder and developer of affordable houses, had declared total income of Rs. 3,59,09,800. The assessment was completed u/s. 143(3) earlier, accepting trading results and purchases. The case was reopened u/s. 148 for A.Y. 2013-14 due to payments of Rs. 2,66,23,428 to non-filer entities based on fake bills. The AO added the entire purchases amount without discussing the assessee's objections.

Upon review, it was found that the case was reopened based on information from the ITBA database about non-filer entities, despite the purchases being part of the previously examined trading amount. The reopening was done almost nine years after the relevant assessment year without evidence of income chargeable to tax. The reassessment was challenged citing the time limit provisions under Section 149 and the first proviso to Section 147, which were not met. As no failure on the part of the assessee to disclose material facts existed, the reopening was deemed bad in law and quashed, resulting in the allowance of the assessee's appeal.

In conclusion, the assessment order was quashed due to the improper reopening of the case beyond the statutory time limits and lack of evidence of income chargeable to tax escaping assessment. The appeal of the assessee was allowed, and the order was pronounced on 3rd July 2024.