2016 (4) TMI 812 - AT - Income Tax

Reopening of assessment - Held that - AO had not proved that the escapement of income was result of failure on part of the assessee to disclose fully and truly the material facts for making the assessment, we hold that the reopening was not valid. Effective ground of appeal (GOA-3)is decided in favour of the assessee. The other arguments like change of opinion or re-opening was based on an audit objection are not being decided, as there is basic legal flaw in re-opening. The AO has not mentioned that the assessee had failed to disclose material fact. Proving of the said fact is the next stage. Therefore, as stated earlier, we hold that notice issued u/s. 148 and consequent assessment was not valid.- Decided in favour of assessee

Summary

Issues:
1. Re-opening of assessment
2. Addition made u/s. 14A
3. Computation of income u/s. 115JB

Re-opening of Assessment:
The case involved a challenge to the re-opening of assessment by the assessee. The Assessing Officer (AO) had issued a notice u/s. 148 to re-open the assessment based on certain discrepancies, including expenses attributable to earning of exempt income, provisions for doubtful debts, and other provisions. The First Appellate Authority (FAA) upheld the re-opening, stating that the AO had valid reasons for reassessment. However, the Authorized Representative (AR) argued that the re-opening was based on audit objections and was a case of change of opinion. The tribunal analyzed the provisions of Section 147 and the proviso, emphasizing that the AO must establish a failure on the part of the assessee to disclose material facts for income escapement. The tribunal found that the AO failed to prove such failure, rendering the re-opening invalid. Citing the case of RPG Transmissions Ltd., the tribunal concluded that the re-opening was not valid due to the lack of evidence of the assessee's failure to disclose material facts.

Addition made u/s. 14A:
The tribunal did not adjudicate on this issue as the jurisdictional ground was decided in favor of the assessee regarding the re-opening of assessment. Therefore, the arguments related to the addition made u/s. 14A were not addressed in the judgment.

Computation of Income u/s. 115JB:
Similarly, the tribunal did not delve into this issue due to the favorable decision on the jurisdictional ground regarding the re-opening of assessment. As a result, the computation of income u/s. 115JB was not further discussed or analyzed in the judgment.

In conclusion, the appellate tribunal allowed the appeal filed by the assessee based on the invalidity of the re-opening of assessment beyond the four-year period. The tribunal emphasized the importance of the AO establishing the failure of the assessee to disclose material facts for income escapement when re-opening assessments. The judgment highlighted the necessity of meeting the conditions specified in Section 147 and the proviso for valid reassessment, ultimately ruling in favor of the assessee due to the lack of evidence supporting the re-opening of assessment.