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2013 (5) TMI 642 - AT - Income TaxReopening of assessment - excessive loss claimed in respect of four projects undertaken - Held that - As decided in Asian Paints (2008 (7) TMI 237 - BOMBAY HIGH COURT) that the legislature has not conferred power on the AO to review its own order. Therefore, the power u/s 147 cannot be used to review the order when nothing new has happened and no new material has come on record. Case of Kelvinator of India Ltd (2010 (1) TMI 11 - SUPREME COURT OF INDIA) squarely apply to the facts of the present case as the AO has initiated reassessment proceedings on the same facts which were available before him at the time of making assessment u/s.143(3) and no new material has come on the basis of which it could be said that he has reason to believe that income chargeable to tax has escaped assessment on account of failure on the part of the assessee to disclose truly and fully material of facts for the assessment. Also held in the case of ICICI Securities Primary Dealership Ltd (2012 (8) TMI 754 - SUPREME COURT) that when no new fact has come to the notice of the department, the accounts had been furnished by the assessee when original assessment was completed u/s.143(3) on a mere re-look, the Officer has come to the conclusion that the income has escaped assessment, is not permissible under the proviso to section 147 which speaks about a failure on the part of the assessee to make a proper return. Thus considering the present case there was failure on the part of the AO to consider material placed before him at the time of making assessment and on a re-look to the said material, AO cannot reopen the assessment and that too after the expiry of more than four years from the end of the relevant assessment year to rectify his own mistake. Thus the initiation of reassessment proceedings by the AO is not legal in the present case & notice issued u/s.148 to initiate reassessment proceedings is not valid and same is quashed.
Issues Involved:
1. Violation of principles of natural justice by CIT(A). 2. Legality of reopening the completed assessment under section 147 of the Income Tax Act, 1961. 3. Validity of reassessment under section 147 when AO did not dispose of the assessee's objections by a speaking order. Issue-wise Detailed Analysis: 1. Violation of principles of natural justice by CIT(A): The appellant's first ground of appeal was that the CIT(A) passed the order under section 250 of the Act in gross violation of the principles of natural justice. However, during the hearing, the appellant's representative did not press for this ground. Consequently, this ground was dismissed as not pressed. 2. Legality of reopening the completed assessment under section 147 of the Income Tax Act, 1961: The assessee, engaged in the contract business of building roads, bridges, tunnels, etc., filed its return of income for the assessment year 2003-04, which was initially assessed under section 143(3). The AO later initiated reassessment proceedings under section 147, citing reasons to believe that income had escaped assessment due to an excessive claim of anticipated loss on four projects. The AO issued a notice under section 148 on 31.3.2010. The assessee contended that the reopening was beyond the four-year time limit from the end of the assessment year 2003-04 and that all material facts had been disclosed during the original assessment. The CIT(A) upheld the AO's action, stating that the disclosure in the notes to the accounts was not full and true or considered by the AO in the original assessment. The Tribunal noted that the original assessment was made under section 143(3) and that the reassessment proceedings were initiated after four years from the end of the relevant assessment year. According to the proviso to section 147, no action can be taken after four years unless there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal observed that the AO did not specify what material facts were not disclosed by the assessee. Citing the decisions of the Hon'ble Bombay High Court and the Hon'ble Supreme Court, the Tribunal concluded that the AO's failure to apply his mind to the material facts at the time of the original assessment could not justify the reopening of the assessment. Therefore, the initiation of reassessment proceedings was held to be invalid, and the notice issued under section 148 was quashed. 3. Validity of reassessment under section 147 when AO did not dispose of the assessee's objections by a speaking order: The assessee argued that the reassessment was invalid as the AO did not dispose of the objections to the reopening by a speaking order. The Tribunal did not find it necessary to address this issue separately, as the initiation of reassessment proceedings itself was held to be invalid. Conclusion: The Tribunal allowed the appeal in part, holding that the initiation of reassessment proceedings by the AO was not legal and quashing the notice issued under section 148. Consequently, the assessment order was void, and there was no need to address the other grounds of appeal related to the disallowance of loss. The order was pronounced in the open court on 22nd May, 2013.
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