2015 (12) TMI 771 - HC - Income Tax

Reopening of assessment - ITAT deleted the reopening assessment - Held that - It is well settled that in order to issue a valid reassessment notice, the AO has to be satisfied on the basis of tangible material or information subsequently available to him that the assessee had not made full and true disclosure which led to income escaping assessment at the stage when the original assessment was completed. Short of that a re-appreciation of the existing materials which really amounts to review is impermissible. The Tribunal, in the circumstances of this case was justified in concluding that re-assessment proceedings themselves were not in accordance with law and consequently dismissing the Revenue s appeal. - Decided in favour of assessee.

Issues:
Reassessment proceedings for AY 2003-04, validity of reopening assessment, disallowance under Section 43B, justification for reassessment notice, full and true disclosure by assessee, review of existing materials, Tribunal's decision, dismissal of Revenue's appeal.

Reassessment Proceedings for AY 2003-04:
The case involved the Revenue's grievance regarding the Tribunal's decision on the reassessment proceedings and subsequent addition to the return income for AY 2003-04. The Assessing Officer (AO) issued a notice under Section 147 and 148 after processing the assessee's return under Section 143(1), alleging an escaped income of Rs. 77,29,146. The AO disallowed certain deductions under Section 43B, leading to the reassessment. The assessee's appeal on merits was allowed, prompting the Revenue to appeal. The Tribunal upheld the assessee's cross appeal, questioning the justification for reopening the assessment.

Validity of Reopening Assessment:
The Tribunal analyzed the reasons for reopening the assessment provided by the AO, focusing on the non-payment of liabilities totaling Rs. 77,29,146 as per the Balance Sheet. The Tribunal concluded that the liabilities were already disclosed by the assessee, and no new material justified the reassessment. The Court agreed with the Tribunal that for a valid reassessment notice, the AO must have tangible material indicating non-disclosure leading to escaped income. Mere re-evaluation of existing data, amounting to a review, is impermissible. The Tribunal's decision on the validity of reassessment proceedings was upheld.

Disallowance under Section 43B:
The AO disallowed the liabilities totaling Rs. 77,29,146 under Section 43B, claiming they were not paid by the due date. The Tribunal found that the liabilities were reflected in the Balance Sheet and were known to the AO during the original assessment. As such, the disallowance was not justified, and the Tribunal's decision on this matter was upheld.

Justification for Reassessment Notice:
The AO issued the reassessment notice based on the alleged inadmissible deduction claimed by the assessee. However, the Tribunal and the Court found that the assessee had disclosed the liabilities in the Balance Sheet, and no new material justified the reassessment. The requirement for tangible material indicating non-disclosure for a valid reassessment notice was emphasized.

Full and True Disclosure by Assessee:
The Court reiterated that a valid reassessment notice requires the AO to be satisfied about the lack of full and true disclosure by the assessee, leading to escaped income. In this case, the Tribunal found that the assessee had disclosed the liabilities, and no new material indicated non-disclosure. Therefore, the reassessment proceedings were deemed unjustified.

Review of Existing Materials:
The Court emphasized that reassessment proceedings should not involve a mere reevaluation of existing materials, as it would amount to impermissible review. The Tribunal's decision to dismiss the Revenue's appeal was based on the lack of new material warranting reassessment, rather than a legitimate re-examination of disclosed information.

Tribunal's Decision and Dismissal of Revenue's Appeal:
Ultimately, the Court upheld the Tribunal's decision, stating that no fault could be found with it. The Tribunal's conclusion that the reassessment proceedings were not in accordance with the law was deemed justified. As no question of law arose for consideration, the appeal was dismissed, affirming the Tribunal's decision.

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