2012 (12) TMI 420 - HC - Income Tax

Reassessment - The assessee objected to the reopening of the assessment. But the objections were rejected and reassessment orders were passed - held that - there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As per the proviso to Section 147 of the Act, assessments beyond four years from the end of the relevant assessment year can be reopened only if there is failure on the part of the assessee to disclose all material facts. Therefore, in the facts of the present case, the decision of the Tribunal in holding that the reopening of the assessment was bad cannot be faulted. Once, it is held that the reopening of the assessment is bad in law, then, in our opinion, the CIT (A) as also the ITAT were not justified in dealing with the merits of the case. - Decided in favor of assessee.

Summary

Issues:
Reopening of assessment beyond four years from the end of the relevant assessment years.

Analysis:
The judgment pertains to two appeals concerning the assessment years 1989-90 and 1998-99. The central issue raised in these appeals is whether the Income Tax Appellate Tribunal (ITAT) was correct in determining that the reopening of the assessments beyond four years from the end of the relevant assessment years was legally flawed. The crux of the matter lies in whether the reassessment was justifiable under the law. The assessments for the mentioned years were reopened based on specific reasons related to expenses claimed by the assessee under the head "Seconded Personnel Expenses." The ITAT's decision on the legality of the reassessment is crucial, as it impacts the subsequent questions concerning the merits of the case.

In both assessment years, the assessing officer had initially passed assessment orders under section 143(3) of the Income Tax Act, 1961. However, the assessments were later sought to be reopened, citing reasons related to overseas compensation expenses claimed by the assessee. The reassessment orders were challenged by the assessee, contending that all material facts necessary for the assessment had been disclosed. The Commissioner of Income Tax (Appeals) (CIT(A)) opined that there was no failure on the part of the assessee to furnish relevant details, thereby questioning the validity of reopening the assessments beyond the stipulated period. The CIT(A) further ruled against the disallowance under Section 40(a)(iii) of the Act. Subsequently, the ITAT upheld the CIT(A)'s decision, leading to the revenue filing appeals against these orders.

Upon reviewing the reasons for reopening the assessments and the findings of both the CIT(A) and ITAT, the High Court concluded that there was no failure on the part of the assessee to fully disclose all material facts essential for the assessment. The Court emphasized the proviso to Section 147 of the Act, which allows assessments beyond four years only in cases of such failure. Consequently, the Court agreed with the ITAT's determination that the reopening of the assessments was legally untenable. Given this finding, the Court held that delving into the merits of the case by the CIT(A) and ITAT was unwarranted. Ultimately, the Court dismissed both appeals, emphasizing the absence of any failure on the assessee's part to disclose crucial information necessary for assessment.

In conclusion, the High Court's judgment centered on the legality of reopening assessments beyond the prescribed timeframe and the requirement for full disclosure of material facts by the assessee. The decision highlighted the significance of adhering to statutory provisions and the necessity for assessing authorities to establish failures in disclosure before reopening assessments.