2016 (9) TMI 1007 - HC - Income Tax

Reopening of assessment - disallowance of loss - Held that - Assessing Officer examined the issue at length in the original assessment order and came to the conclusion that the transactions were not off market transactions and that therefore the loss suffered by the assessee cannot be disallowed. Whatever be the validity of such findings surely the Assessing Officer himself cannot question the same by issuing the notice for reopening that too without there being anything additional on record suggesting that the assessee had not disclosed true and full facts. In the reasons recorded the Assessing Officer does not even comment on the fact that M/s.Nitin Parikh and Co. were the sister concerns a ground vaguely sought to be made out by the counsel for the Revenue. Assessing Officer merely hinted at lack of disclosure regarding the so called self inflicted loss. He did not even refer to the assessee s lack of disclosure of M/s.Nitin Parikh and Co. being sister concern. In any case in the order of assessment itself the Assessing Officer was actually aware about the fact that M/s.Nitin Parikh and Co. was a part of the group of companies of which the assessee was also one of the members. We have reproduced the relevant portion of para 5 of the order of assessment in which the Assessing Officer himself refers to M/s.Nitin Parikh and Co. as one of the group concerns. His consideration of the issue of allowability of the loss was therefore not tainted by any misdeclaration by the assessee. Once therefore when the issue was thoroughly examined in the original order of assessment it was simply not permissible for the Assessing Officer to reopen the assessment on such basis without there being any suggestion that the Assessing Officer was in possession of some external material which would show that the assessee had not show truly and fully all material facts.

Summary

Issues:
1. Challenge to notice for reopening assessment for the assessment year 2004-05 beyond the prescribed period.
2. Failure to disclose material facts by the assessee.
3. Permissibility of reopening assessment based on the same issue already examined in the original assessment.
4. Disallowance of business loss on off-market share transactions.

Issue 1: Challenge to Notice for Reopening Assessment

The petitioner challenged a notice issued by the Assessing Officer for reopening the assessment for the assessment year 2004-05, beyond the four-year period from the end of the relevant assessment year. The Assessing Officer sought to reopen the assessment based on the disallowance of certain losses and lack of disclosure regarding off-market transactions with a sister concern. The petitioner contended that there was no failure on their part to disclose all material facts, rendering the reassessment beyond four years impermissible.

Issue 2: Failure to Disclose Material Facts

The petitioner argued that they had not failed to disclose all material facts, emphasizing that the Assessing Officer had already examined the claim forming the basis for the reassessment during the original assessment. The contention was that the assessment could not be reopened solely on the ground of alleged lack of disclosure by the assessee.

Issue 3: Permissibility of Reopening Assessment

The Assessing Officer's reasons for reopening the assessment primarily revolved around the disallowance of losses on off-market transactions with a sister concern. However, the original assessment had extensively considered and accepted the explanations provided by the assessee regarding these transactions. The court noted that the Assessing Officer had already examined the issue in detail during the original assessment, making it impermissible to reopen the assessment without new material suggesting non-disclosure of facts by the assessee.

Issue 4: Disallowance of Business Loss

The Assessing Officer's contention for reopening the assessment was based on the disallowance of a significant loss incurred by the assessee in off-market transactions with a sister concern. However, the original assessment had thoroughly examined and accepted the explanations provided by the assessee regarding these transactions. The court found that the Assessing Officer's attempt to reopen the assessment on the same grounds without new material was unjustified.

In conclusion, the High Court quashed the impugned notice dated 29.03.2011 for reopening the assessment for the assessment year 2004-05. The court allowed the petition, emphasizing that the Assessing Officer had already examined the relevant issues in detail during the original assessment, making it impermissible to reopen the assessment solely on the grounds of lack of disclosure or disallowance of losses on off-market transactions with a sister concern.