2014 (10) TMI 431 - AT - Income Tax

Reopening of assessment u/s 147 r.w section 148 True and full disclosure - Unexplained cash credit u/s 68 - Held that - Assessee s case falls within the proviso to section 147 because assessment had been completed u/s 143(3) and the reopening has been made after 4 years from the end of relevant assessment year - on a mere change of opinion on the same set of facts, there cannot be any reopening - In order to clothe with the jurisdiction of reopening to assessing officer after four years from the end of relevant assessment year, there should be failure on the part of the assessee to disclose fully and truly all material facts, necessary assessment - Mere escapement of income is not sufficient, but it should be coupled with the omission on the part of assessee to disclose fully and truly all material facts - once the information has been received by assessing officer regarding accommodation entries being taken by assessee from the Investigation Wing, then he has no course of action open except to resort to the provisions of section 147 - in case of assessment completed u/s 143(3) after four years, mere escapement of income, cannot give jurisdiction to him to reopen the assessment - The reasons recorded by AO have to be examined to find out whether the mandate of proviso to section 147 in such cases have been met or not. Relying upon CIT. Versus VINIYAS FINANCE AND INVESTMENT PVT LTD. 2013 (3) TMI 35 - DELHI HIGH COURT - assessee had filed all the details in regard to the loans in the original assessment proceedings u/s 143(3), which were examined by AO, the escapement cannot be said to be on account of failure on the part of assessee to disclose fully and truly all material facts, necessary for assessment thus, the reopening of assessment proceedings, initiated by the AO u/s 147 is are bad in law Decided in favour of assessee.

Issues Involved:
1. Legality of initiation of proceedings under section 147 of the Income Tax Act.
2. Validity of the assessment framed under section 147/143(3) of the Income Tax Act.
3. Addition of Rs. 7,50,000/- as unexplained cash credit under section 68 of the Income Tax Act.
4. Levying of interest under section 234B of the Income Tax Act.

Detailed Analysis:

1. Legality of Initiation of Proceedings under Section 147:

The assessee argued that the reopening of the assessment under section 147 was unlawful because the original assessment was completed under section 143(3) and more than four years had elapsed. According to the proviso to section 147, such reopening can only be done if there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The assessee contended that the reopening was based on a mere change of opinion. The CIT(A) did not accept the assessee's contention, observing that the assessee had not disclosed the amounts received from SFPL and SDLSMPL, which escaped the attention of the assessing officer during the original assessment. The CIT(A) upheld the initiation of proceedings under section 147, concluding that there was an omission or failure on the part of the assessee to disclose fully and truly the correct facts, resulting in income escaping assessment.

2. Validity of the Assessment Framed under Section 147/143(3):

The assessee contended that the initiation of proceedings under section 147 and the subsequent assessment framed under section 147/143(3) were without jurisdiction and deserved to be quashed. The assessee argued that the reasons recorded for reopening the assessment did not allege any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The assessee relied on several judicial decisions to support the argument that beyond four years, notice under section 148 can only be issued if there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The Tribunal, after considering the rival submissions and the record of the case, concluded that the reasons recorded by the assessing officer did not demonstrate that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The Tribunal held that the reopening of assessment proceedings initiated by the assessing officer under section 147 was bad in law.

3. Addition of Rs. 7,50,000/- as Unexplained Cash Credit under Section 68:

The assessee challenged the addition of Rs. 7,50,000/- representing share capital received, which was held to be unexplained cash credit under section 68 of the Act. The assessee argued that all documentary evidence to discharge the burden under section 68 was provided, including confirmations, bank statements, and other relevant documents. The CIT(A), however, confirmed the addition, observing that the assessee failed to produce the parties for verification, and thus, the identity, creditworthiness of the subscriber, and genuineness of the transaction were not established. The Tribunal did not specifically address this issue in detail, as it allowed the appeal on the grounds of the illegality of the initiation of proceedings under section 147.

4. Levying of Interest under Section 234B:

The assessee also contested the levy of interest under section 234B of the Act. The Tribunal did not specifically address this issue, as it allowed the appeal on the primary ground of the illegality of the initiation of proceedings under section 147.

Conclusion:

The Tribunal allowed the assessee's appeal, holding that the reopening of assessment proceedings initiated by the assessing officer under section 147 was bad in law, as the reasons recorded did not demonstrate that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Consequently, the Tribunal did not address the merits of the addition of Rs. 7,50,000/- as unexplained cash credit under section 68 or the levy of interest under section 234B. The order pronounced in open court on 03-09-2014.

← Previous Next →