2014 (4) TMI 977 - AT - Income Tax

Validity of re-opening of assessment u/s 148 of the Act Contrary view taken by the AO - Held that - The fact regarding the provision for doubtful debts and advances was duly disclosed by the assessee in the profit & loss account which was filed along with the return - The assessee has also added back the provision in the computation of income under the normal provision but the same was not included in computing the book profit u/s 115JB - the fact regarding the provision in respect of doubtful debts was duly disclosed by the assessee. The findings of the AO is contrary to his own finding wherein the AO himself has mentioned that the assessee company has debited Rs.34,02,529/- to the profit & loss account as provision for doubtful debts and advances and which was written back in the computation of income under the normal provision - it is evident that the assessee has disclosed all facts relating to the provision for doubtful debts and advances thus, reopening of the assessment beyond four years wherein the original assessment was completed u/s 143(3) was not permissible thus, the notice is set aside Decided in favour of Assessee.

Summary

Issues:

1. Validity of reopening of assessment under Section 147 after four years from the end of the relevant assessment year.

Analysis:

The appeal was against the order of the learned CIT(A)-19, New Delhi for the assessment year 2004-05. The main issue raised in the appeal was the validity of the reopening of assessment under Section 147 of the Income-tax Act. The notice for reopening was issued more than four years after the end of the relevant assessment year, where the original assessment was completed under Section 143(3) of the Act. The proviso to Section 147 was crucial in this case, stating that no action can be taken under Section 147 after the expiry of four years from the end of the relevant assessment year if the original assessment was completed under Section 143(3) unless there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.

The Tribunal noted that in this case, the original assessment was completed under Section 143(3) and the reopening was done after the four-year limit. The Assessing Officer's reasons for reopening the assessment included an alleged failure by the assessee to disclose material facts regarding a provision for doubtful debts and advances. However, the Tribunal found that the assessee had duly disclosed this provision in the profit & loss account filed with the return. The Tribunal emphasized that the Assessing Officer's finding of non-disclosure was contradictory to his own acknowledgment of the disclosure in the earlier paragraph. Consequently, the Tribunal held that the reopening of assessment beyond the four-year limit was impermissible, quashing both the notice under Section 148 and the subsequent assessment order.

As a result of quashing the assessment order, the Tribunal did not adjudicate on other grounds raised by the assessee in the appeal. The appeal was allowed, and the original assessment order dated 28th December, 2006, was restored. The decision was pronounced in open court on 17th April 2014.