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2018 (9) TMI 861 - AT - Income TaxReopening of assessment - Held that - Hon ble Supreme Court in the case Foramer France 2003 (1) TMI 101 - SUPREME COURT has taken the view that the first proviso to section 147 of the Act 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. We have gone through the reasons recorded for issuance of notice under section 148 of the Act as reproduced above and noted that on both the issues i.e. Prior Period Adjustments of brokerage refund as well as interest paid to Global Trust Bank and Madhavpura Mercantile Co-op Bank the complete details were filed before the AO during the course of original assessment proceedings in response to the queries raised by the AO. Admittedly the assessment was completed under section 143(3) of the Act and reopening by issuing notice under section 148 of the Act is beyond four years - decided in favour of assessee
Issues Involved:
1. Assumption of jurisdiction by the AO for reopening assessment under section 147 read with section 148 of the Income Tax Act, 1961. 2. Validity of the reasons recorded for reopening the assessment. 3. Whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Issue-wise Detailed Analysis: 1. Assumption of Jurisdiction by the AO for Reopening Assessment: The primary issue in this appeal is the assumption of jurisdiction by the Assessing Officer (AO) for reopening the assessment under section 147 read with section 148 of the Income Tax Act, 1961. The assessee contended that the reopening was based on vague, insufficient, and erroneous reasons, and hence, the notice issued under section 148 was bad in law. The original assessment was completed under section 143(3) of the Act on 17.02.2006, and the reopening notice was issued on 29.01.2010, which is beyond four years from the end of the relevant assessment year. 2. Validity of the Reasons Recorded for Reopening the Assessment: The reasons recorded for reopening the assessment were: - Prior period adjustment on account of refund of brokerages amounting to ?7,51,86,892/- escaped assessment. - Provision of interest debited to the profit and loss account towards interest paid to Global Trust Bank and Madhavpura Mercantile Co-op Bank amounting to ?19,27,71,401/-. The assessee argued that the reopening was merely a change of opinion as the AO had already considered these aspects during the original assessment proceedings. The details of prior period adjustments and interest claimed were filed before the AO during the original assessment proceedings, and the AO had raised queries and allowed the claims after considering the replies. 3. Whether There Was a Failure on the Part of the Assessee to Disclose Fully and Truly All Material Facts Necessary for Assessment: The assessee contended that there was no failure on its part to disclose fully and truly all material facts necessary for the assessment. The AO had all the relevant details during the original assessment proceedings. The Tribunal noted that the reopening was beyond four years, and as per the first proviso to section 147, no action can be taken unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Tribunal's Findings: The Tribunal found that the reopening was based on issues that were already considered by the AO during the original assessment proceedings. The Tribunal referred to the decision of the Hon’ble Supreme Court in the case of CIT vs. Foramer France (2003) 264 ITR 566 (SC), which held that the AO is not permitted to reopen the assessment beyond four years unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Since there was no such failure on the part of the assessee, the reopening was barred by limitation under the proviso to section 147 and was without jurisdiction. Conclusion: The Tribunal allowed the appeal of the assessee, quashing the reassessment proceedings on the ground that the reopening was beyond the permissible period of four years and there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Consequently, the reassessment order framed by the AO was set aside. Final Order: The appeal of the assessee was allowed, and the order was pronounced in the open court on 31-08-2018.
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