2015 (11) TMI 1306 - AT - Income Tax

Reopening of assessment - Held that - A perusal of the Reasons would clearly reveal that these have been recorded by the AO on the basis of examination done by the AO of the existing assessment records of the assessee-company. On none of the issues we could find reference to any fresh tangible material in the possession of the AO to make a belief about escapement of income. In our considered view, the law in this regard is now well settled. As relied upon by the learned Counsel also, recently Hon ble Mumbai Bench of the Tribunal in the case of Motilal R.Todi (2015 (11) TMI 181 - ITAT MUMBAI) has analyzed the entire law available on this issue, and thereafter it was held by the Hon ble Bench that reopening was invalid in the absence of fresh tangible material. Therefore, reopening is held invalid for want of availability of requisite conditions for exercising the jurisdiction of reopening by the Assessing Officer. The law does not give powers to the AO to reopen an assessment carried out u/s 143(3) after the expiry of four years unless the AO is able to demonstrate that there was failure on the part of the assessee in disclosure of material facts - Decided in favour of assessee

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of reopening of assessment under Section 147 after four years.
3. Requirement of fresh tangible material for reopening.
4. Allegation of failure to disclose material facts by the assessee.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee-company filed an appeal with a delay of 16 days. The learned Counsel for the assessee demonstrated sufficient cause for the delay, and no serious objection was raised by the Departmental Representative. The Tribunal, relying on the Supreme Court judgment in Collector, Land Acquisition v. Mst.Katiji & Ors., found it appropriate to condone the delay in the interest of justice and admitted the appeal for adjudication on its merits.

2. Validity of Reopening of Assessment Under Section 147 After Four Years:
The assessee challenged the reopening of the assessment, arguing that the original assessment was completed under Section 143(3) and the notice under Section 148 was issued after the expiry of four years from the end of the assessment year. The assessee contended that there was no allegation of failure to disclose material facts, thus invoking the proviso to Section 147, which restricts reopening after four years unless there is such a failure. The Tribunal noted that the reasons for reopening did not mention any failure on the part of the assessee to disclose material facts, and thus, the reopening was contrary to law. The Tribunal cited several judgments, including those from the Bombay High Court and the Supreme Court, to support this view, holding the reopening invalid on this ground.

3. Requirement of Fresh Tangible Material for Reopening:
The Tribunal observed that the reasons for reopening were based on the examination of existing assessment records and not on any fresh tangible material. The Tribunal emphasized that the law requires fresh tangible material for reopening an assessment, as established in various judgments, including those from the Supreme Court and High Courts. The Tribunal referred to the case of Motilal R.Todi and others, reiterating that reopening without fresh tangible material is invalid. Consequently, the Tribunal held that the reopening was invalid due to the absence of fresh tangible material.

4. Allegation of Failure to Disclose Material Facts by the Assessee:
The Tribunal noted that the reasons for reopening did not allege any failure on the part of the assessee to disclose material facts. The Tribunal highlighted that the law does not permit reopening under Section 147 after four years unless there is a failure to disclose material facts. The Tribunal referred to the first proviso to Section 147 and several judgments, including those from the Bombay High Court and the Supreme Court, which mandate that reopening cannot be done without such an allegation. The Tribunal concluded that the reopening was invalid on this ground as well.

Separate Judgment for Assessment Year 2006-2007:
For the assessment year 2006-2007, the Tribunal followed the same reasoning as for the assessment year 2005-2006, condoning the delay and admitting the appeal. The Tribunal noted that the reopening was done within four years, but still required fresh tangible material, which was absent. Additionally, the Tribunal found that the reopening was based on a change of opinion, which is not permissible under the law. The Tribunal referred to the case of DIT v. HSBC Asset Management India Pvt. Ltd., emphasizing that depreciation allowed in the first year becomes part of the block of assets and cannot be disallowed in subsequent years. The Tribunal held that the reopening was invalid due to the absence of fresh tangible material and being based on a change of opinion.

Conclusion:
The Tribunal allowed both appeals, quashing the reassessment orders on the grounds of invalid reopening due to the absence of fresh tangible material and failure to allege non-disclosure of material facts by the assessee. The Tribunal refrained from adjudicating other grounds raised by the assessee on merits.