2019 (9) TMI 314 - HC - Income Tax

Reopening of assessment u/s 147/148 - notice beyond a period of four years from the end of the relevant Assessment Year - ITAT quashing reassessment proceedings - HELD THAT - It is an undisputed position that for the Assessment Year 2005-06, assessment was completed under Section 143(3) of the Act on 29th December, 2008. Thereafter, on 27th March, 2012, a notice under Section 148 of the Act was issued to the Respondent, seeking to reopen the assessment for the Assessment Year 2005-06. Thus, the re-opening notice was admittedly beyond a period of four years. It is also an undisputed position that reasons recorded for reopening of an assessment does not mention any failure on the part of the Respondent to disclose fully and truly all material facts necessary for the assessment. As decided in TITANOR COMPONENTS LTD. VERSUS ACIT, CIT AND UOI 2011 (6) TMI 138 - BOMBAY HIGH COURT it is necessary for the AO to first observe that there is a failure to discloser fully and truly all material facts necessary for assessment and having observed that there is such failure to proceed under Section 147 - no substantial question of law - decided against revenue

Summary

Issues:
Jurisdiction of Assessing Officer to re-open assessment under Section 147/148 of the Income Tax Act beyond the prescribed time limit.

Analysis:
The appeal challenges the order of the Income Tax Appellate Tribunal regarding the reassessment proceedings for Assessment Year 2005-06. The primary issues raised include the justification of quashing the reassessment proceeding initiated by the Assessing Officer under Section 147 r.w.s. 148 of the IT Act, the validity of quashing the reopening under Section 147 without mentioning failure to disclose material facts, and the consideration of the matter on the merits of the case. The central question is the AO's jurisdiction to re-open an assessment beyond the four-year limit from the end of the relevant Assessment Year, especially when the recorded reasons do not indicate any failure on the part of the taxpayer to fully and truly disclose all material facts necessary for assessment.

The reasons recorded for the reopening notice highlighted the non-debiting of bad debts in the profit and loss account, leading to under-assessment of income. The Respondent provided detailed explanations and submissions, asserting no understatement or underassessment of income. The Tribunal's decision to quash the reopening aligns with the principle established in Titanor Components Ltd., v/s. CIT 343 ITR 183, emphasizing the necessity for the AO to identify a failure in disclosing material facts before proceeding under Section 147. As per the court's observation in the aforementioned case, the absence of recording such a failure prohibits the AO from acting under Section 147.

Given the precedent set by the court and the lack of substantial questions of law arising from the Tribunal's decision, the High Court dismissed the appeal. The judgment underscores the importance of adherence to legal requirements and precedents in re-opening assessments under the Income Tax Act, ensuring that the AO properly establishes failures in disclosing material facts before initiating such proceedings.