2019 (1) TMI 1416 - HC - Income Tax

Reopening of assessment u/s 147 - notice issued beyond the period of four years from the end of the relevant Assessment Year as assessment completed under section 143(3) - change of opinion - Tribunal held that the reopening of the assessment u/s. 147 of the Act, was unjustified and incorrect?Held that - Order of the Tribunal is not on account of change of opinion but on account of no failure to disclose fully and truly all material facts necessary for assessment in regular assessment proceeding, leading to an order under Section 143(3) of the Act. This the Tribunal held bars the Revenue from issuing reopening notice under Section 143(3) of the Act beyond a period of four years from the end of the relevant Assessment Year in terms of the proviso to Section 147 of the Act. In the above facts, no fault can be found with the setting aside of the reopening notice dated 28th March, 2011 issued in respect of an assessment completed under section 143(3) of the Act beyond the period of four years from the end of the Assessment Year 2004-05 in the absence of failure to disclose all material facts truly and fully in the regular assessment proceedings. Thus, no fault can be found with the impugned order of the Tribunal as it only follows the settled law. - Decided in favour of assessee

Summary

Issues:
Challenge to the validity of reopening of assessment under Section 147 of the Income Tax Act, 1961 for Assessment Year 2004-05.

Analysis:
The High Court of Bombay heard an appeal challenging the order of the Income Tax Appellate Tribunal (the Tribunal) dated 12th February, 2016, concerning the reopening of assessment for Assessment Year 2004-05 under Section 147 of the Income Tax Act, 1961. The Revenue raised a question of law regarding the justification of the Tribunal's decision in holding the reopening of assessment as unjustified and incorrect. The original assessment for the subject year was completed on 28th September, 2006 under Section 143(3) of the Act. Subsequently, on 28th March, 2011, a notice under Section 148 was issued by the Assessing Officer to reopen the assessment based on discrepancies related to exchange fluctuation and non-disclosure of income. The Respondent challenged the validity of the reopening notice, but the challenge was dismissed, leading to a reassessment order on 28th October, 2011. The Commissioner of Income Tax (Appeals) set aside the reopening proceedings, stating it was beyond jurisdiction, which was upheld by the Tribunal.

The Tribunal observed that the reopening notice was issued beyond the permissible four-year period from the end of the relevant Assessment Year and was not based on any fresh tangible material but on existing records. The Tribunal held that the notice was without jurisdiction as there was no failure to disclose all material facts during the original assessment under Section 143(3) of the Act. The Revenue contended that since no issue was raised during the original assessment, there was no bar to issuing the reopening notice. However, the High Court noted that the Tribunal's decision was based on the failure to disclose all material facts during the initial assessment, not on a change of opinion, thus upholding the decision to set aside the reopening notice. The Court emphasized that the Tribunal's decision followed established law, and the question raised did not present any substantial legal issues. Therefore, the appeal was dismissed, and no costs were awarded.