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2016 (4) TMI 334 - AT - Income TaxReopening of assessment - Held that - AO for initiating the reopening of the assessment proceedings beyond the period of 4 years from the end of the relevant assessment year has to establish that there was escapement of income chargeable to tax because of the failure of the assessee to disclose fully and truly the material facts necessary for the assessment. Neither in the reasons recorded for reopening the assessment nor in the order of re-assessment u/s147 of the Act. The AO has not brought out facts to show any omission on the part of the assessee to disclose fully and truly the material facts when the original assessment was completed. We are of the view that the re-opening of the completed assessment u/s 143(3) of the Act beyond the period of 4 years cannot be justified. We hold that the re-opening of the assessment is beyond the time contemplated by the proviso to sec.147 of the Act and therefore, initiation of re-assessment proceedings is held to be bad. - Decided in favour of assessee
Issues Involved:
1. Dismissal of the Assessee's appeal. 2. Validity of the reassessment proceedings initiated by the AO under Section 148 of the Income Tax Act. 3. Addition of Rs. 1,05,79,669 to the Assessee's total income based on alleged evasion of customs duty. Detailed Analysis: 1. Dismissal of the Assessee's Appeal: The Assessee's counsel submitted that the Assessee did not wish to press adjudication of its appeal. Consequently, the Assessee's appeal was dismissed as not pressed. 2. Validity of the Reassessment Proceedings: The reassessment proceedings were initiated by the AO under Section 148 of the Income Tax Act for AY 1996-97, based on information received from the Department of Revenue Intelligence (DRI) that the Assessee was involved in importing consignments without paying customs duty by forging import documents. The AO believed that income chargeable to tax had escaped assessment and issued a notice under Section 148. The Assessee contested the reassessment proceedings, arguing that they were barred by time as per the proviso to Section 147 of the Act, which requires that reassessment proceedings initiated after four years from the end of the relevant assessment year must be due to the Assessee's failure to disclose fully and truly all material facts necessary for assessment. The Assessee cited the decision of the Hon'ble Bombay High Court in Hindustan Lever Ltd. Vs. ACIT and the ITAT's decision in the case of Ashwani Kumar More, which held that reassessment proceedings initiated merely on the basis of action by Customs Authorities were invalid. The CIT(A) agreed with the Assessee, holding that the initiation of reassessment proceedings was bad in law, following the precedent set in the case of Ashwani Kumar More. The CIT(A) observed that there was no failure on the part of the Assessee to disclose fully and truly all material facts necessary for assessment, and thus the reassessment proceedings were barred by time. 3. Addition of Rs. 1,05,79,669 to the Assessee's Total Income: The AO added Rs. 1,05,79,669 to the Assessee's total income, treating it as suppressed sales based on the alleged evasion of customs duty. The Assessee argued that these sales were duly recorded in the books of accounts and that the customs duty evasion, if any, should be dealt with by the Customs Department and not be treated as income under the Income Tax Act. The Tribunal upheld the CIT(A)'s order, confirming that the reassessment proceedings were invalid and thus the addition of Rs. 1,05,79,669 could not be sustained. The Tribunal noted that the reasons recorded by the AO for reopening the assessment did not establish any failure on the part of the Assessee to disclose material facts fully and truly. Conclusion: The Tribunal dismissed both the Assessee's and the Revenue's appeals. The reassessment proceedings initiated under Section 148 were held to be invalid as they were barred by time and lacked the necessary basis to establish that the Assessee had failed to disclose material facts fully and truly. Consequently, the addition of Rs. 1,05,79,669 to the Assessee's total income was also invalidated.
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