2024 (11) TMI 228 - AT - Income Tax

Reopening u/s 147/148 - notice after the expiry of 4 years - allegation regarding the failure on the part of assessee was noted by the AO qua the deposits in bank accounts of the assessee - HELD THAT - As present case was earlier assessed u/s 143(3) and during the original proceedings, there was no allegation of non-compliance on the assessee. There were observations by the AO in the original assessment proceedings regarding turnover of the assessee certain disallowance on account of low GP rate and lump sum addition towards certain expenses have been carried out, therefore, it is evident that the books of accounts and relevant material was undergone the scrutiny by the AO. In such a situation, it cannot be said that the requisite information was not furnished by the assessee in the original assessment and there was any failure on this count on the part of assessee. Herein, we may take support from the order in the case of New Delhi Television Ltd. 2020 (4) TMI 133 - SUPREME COURT wherein it is held that the assessee is obligated to dislodge the primary facts, it is neither required to disclose the secondary facts nor required to give any assistance to the AO by discloser of other facts, it is for the AO to decide what inference are to be drawn from the facts before him. We are of the considered opinion that in present case the revenue, though have alleged so in the reasons to believe, but unable to substantiate any failure on the part of assessee to disclose fully truly all material facts necessary for his assessment. We, thus, find force in the contentions raised by the Ld. AR through the first ground of the present appeal, that the reopening proceedings have been initiated against the assessee beyond a period of 4 years, wherein an assessment u/s 143(3) was already completed on 19.11.2016, therefore, the instant case is squarely falls withing the scope of the provisions of first proviso to section 147, but the action of Ld. AO was not in harmony with the said provision, accordingly, the jurisdiction assumed by the Ld. AO was not tenable in the eyes of law, therefore, the assessment order passed u/s 147 r.w.s. 144 r.w.s. 144B dated 26.03.2022 on the foundation of such invalid jurisdiction has not sanctity, thus, unsustainable and is liable to be annulled. Assessee appeal allowed.

Issues Involved:

1. Validity of reopening under Section 147/148 of the Income Tax Act, 1961.
2. Alleged change of opinion without new material.
3. Addition of undisclosed business income not part of original reasons for reopening.
4. Borrowed satisfaction and lack of nexus for reopening.
5. Validity of approval under Section 151(1) by the Principal Commissioner of Income Tax (PCIT).
6. Sustaining addition on an ad hoc basis by the Commissioner of Income Tax (Appeals) [CIT(A)].
7. Absence of notice under Section 143(2) after filing return of income.

Detailed Analysis:

1. Validity of Reopening under Section 147/148:

The primary issue was whether the reopening of assessment under Section 147/148 was valid. The assessee argued that the reopening was invalid as it was initiated beyond four years from the end of the relevant assessment year without any failure on the part of the assessee to disclose fully and truly all material facts. The Tribunal observed that the original assessment was completed under Section 143(3), and the reasons recorded for reopening did not specifically point out any failure by the assessee to disclose material facts. The Tribunal relied on various judgments, including those from the Supreme Court and High Courts, which emphasize that reopening beyond four years requires a specific failure on the part of the assessee to disclose material facts. Consequently, the Tribunal held that the reopening was invalid and quashed the assessment.

2. Alleged Change of Opinion:

The assessee contended that the reopening was merely a change of opinion, as the same material facts were considered during the original assessment under Section 143(3). The Tribunal noted that the Assessing Officer (AO) had scrutinized the assessee's books of accounts and relevant material during the original assessment, and there was no new tangible material to justify the reopening. The Tribunal concluded that the reopening was based on a change of opinion, which is not permissible under the law.

3. Addition of Undisclosed Business Income:

The reassessment included an addition of Rs. 45,05,905 as undisclosed business income, which was not part of the original reasons for reopening. The Tribunal found that the addition was made on an independent issue not related to the reasons recorded for reopening. Citing relevant case law, the Tribunal held that such an addition was not permissible and further invalidated the reassessment on this ground.

4. Borrowed Satisfaction and Lack of Nexus:

The assessee argued that the reopening was based on borrowed satisfaction without a live link or nexus between the information of bank deposits and the formation of belief of escaped income. The Tribunal noted that the information received from the Investigation Wing was not independently verified by the AO and was based on presumption. The Tribunal held that the reopening lacked the necessary nexus and was invalid.

5. Validity of Approval under Section 151(1):

The approval for reopening granted by the PCIT was challenged as being mechanical and without application of mind. The Tribunal observed that the approval was granted without verifying the necessity of reopening beyond four years and without considering the absence of failure by the assessee to disclose material facts. The Tribunal found the approval invalid, further supporting the quashing of the reopening.

6. Sustaining Addition on an Ad Hoc Basis:

The CIT(A) sustained an addition of Rs. 45,05,905 on an ad hoc basis, which the assessee argued was unjustified. The Tribunal noted that the addition was made without substantial evidence and was based on presumption and surmises. The Tribunal held that such an addition was not justified in the eyes of the law.

7. Absence of Notice under Section 143(2):

The assessee raised an additional ground regarding the absence of a notice under Section 143(2) after filing the return of income in response to the notice under Section 148. The Tribunal acknowledged this procedural lapse, which further contributed to the invalidity of the reassessment proceedings.

Conclusion:

The Tribunal, after considering all the issues and relevant case law, concluded that the reopening of the assessment was invalid due to the lack of failure on the part of the assessee to disclose material facts, absence of new tangible material, and procedural lapses. Consequently, the Tribunal quashed the reassessment order and allowed the appeal in favor of the assessee.

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