2017 (11) TMI 111 - AT - Income Tax

Reopening of assessment under section 147 - Held that - This issue is squarely covered in favor of the assessee and against Revenue by the decision of Hon ble Supreme Court in the case CIT vs. Foramer France (2003 (1) TMI 101 - SUPREME Court) has taken the view that the first proviso to section 147 lays down an exception whereby the AO is not permitted to exercise his jurisdiction in reopening the assessment beyond a period of four years from the end of the relevant assessment year. Once the exception carved out by proviso to s. 147 comes into play, the case would fall outside the ambit of s. 147 of the Act. As per proviso to s. 147 no action under this section can be taken after expiry of four years from the end of the relevant assessment year, unless inter alia, income chargeable to tax had escaped assessment by reason of failure of the assessee to make full and true disclosure of all material facts necessary for assessment. In case, there being no whisper in the reasons supplied to assessee that income escaped assessment by reason of assessee s failure to make a full and true disclosure of all material facts necessary for assessment, notice under s. 148 issued beyond four years from the end of relevant assessment year was barred by limitation under proviso to s. 147 hence without jurisdiction. If either of these conditions is not fulfilled the notice is without jurisdiction. If the notice issued u/s 148 fails to satisfy either of the conditions, it deserves to be quashed. However, the officers have many time issued notices for reopening the assessments even beyond four years from the end of the assessment year without fulfillment of any of the legal conditions as stipulated in the first proviso to this section. Appeal of assessee is allowed.

Summary

Issues Involved:
1. Legality of reopening the assessment under section 147 read with section 148 of the Income Tax Act, 1961.

Detailed Analysis:

1. Legality of Reopening the Assessment under Section 147 read with Section 148:

The primary issue in this appeal concerns the reopening of the assessment for the Assessment Year (AY) 2007-08 under sections 147 and 148 of the Income Tax Act, 1961. The original assessment was completed under section 143(3) on 18-11-2009. The Assessing Officer (AO) issued a notice under section 148 on 29-03-2014, based on the findings during the assessment proceedings for AY 2011-12, where the assessee's claim of agricultural income was not substantiated.

The AO recorded reasons for reopening the assessment, stating that the assessee had shown agricultural income of ?31,15,389/- for AY 2007-08, and there was a need to verify the claim due to the failure to disclose fully and truly all material facts necessary for the assessment.

The Counsel for the assessee argued that the reopening was based on the addition made in AY 2011-12, which was subsequently deleted by the CIT(A). The CIT(A) found that the assessee had provided sufficient evidence, including confirmations from Jabs International and other documents, to substantiate the agricultural income claim. The CIT(A) noted that the assessee had consistently shown agricultural income from 2003-04 onwards, and the Revenue had not doubted the veracity of the same in previous assessments.

The Counsel for the assessee also highlighted that the details were available during the original assessment proceedings, and there was no failure on the part of the assessee to disclose material facts. The reopening was beyond four years from the end of the relevant assessment year, and the reasons recorded by the AO did not indicate any failure by the assessee to disclose fully and truly all material facts.

The Tribunal found that the issue was covered in favor of the assessee by the Hon’ble Supreme Court's decision in CIT vs. Foramer France (2003) 264 ITR 566 (SC). The Supreme Court held that the first proviso to section 147 of the Act restricts the AO from reopening the assessment beyond four years unless there is a failure by the assessee to make a full and true disclosure of all material facts. In this case, there was no such failure by the assessee, and the reopening was barred by limitation.

The Tribunal concluded that the reopening of the assessment was without jurisdiction, as the conditions stipulated in the first proviso to section 147 were not fulfilled. Consequently, the reassessment proceedings were quashed.

Conclusion:

The Tribunal allowed the appeal of the assessee, quashing the reassessment proceedings on the grounds that the reopening was beyond the permissible period and there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The issue of jurisdiction was decided in favor of the assessee, and the need to adjudicate the issue on merit was obviated. The order was pronounced in the open court on 05-07-2017.