2019 (12) TMI 608 - AT - Income Tax

Reopening of assessment u/s 147 - notice u/s.148 issued after four years from the end of the relevant Assessment Year - HELD THAT - AO has not recorded any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for that assessment year. Therefore, the assessee clearly makes out the case. Since the essential condition for reopening the assessment u/s.147 is absent, the reassessment made u/s.147 w.r.s143(3) dated 30.03.2016 is not valid and hence the re-assessment order is quashed and the cross objection filed by the assessee is allowed. Since we have quashed the reassessment order passed u/s.143(3) r.w.s147, the appeal filed by the Revenue has become infructuous and hence dismissed.

Summary

Issues involved:
1. Validity of reopening of assessment u/s.147
2. Barred by limitation - reopening beyond 4 years
3. Failure on the part of assessee to disclose material facts
4. Change of opinion
5. Doctrine of Merger

Detailed Analysis:
1. Validity of reopening of assessment u/s.147:
The case involved a firm engaged in buying and selling film satellite copy rights. The Assessing Officer reopened the assessment u/s.147, treating the film rights purchased as an intangible asset. The Commissioner of Income Tax (Appeals) upheld the validity of the reopened assessment but allowed the appeal on merit. The Revenue challenged this order, while the assessee filed a Cross-Objection contesting the reopening of assessment.

2. Barred by limitation - reopening beyond 4 years:
The assessee contended that the reopening of assessment beyond 4 years was barred by limitation. They argued that the notice issued after the expiry of four years from the end of the assessment year was illegal and without jurisdiction. The Commissioner of Income Tax (Appeals) failed to appreciate that the Assessing Officer needed to allege a failure on the part of the assessee to make full and true disclosure of facts and materials for assuming jurisdiction u/s.147 beyond 4 years.

3. Failure on the part of assessee to disclose material facts:
The assessee argued that they had disclosed all details pertaining to the purchase and sale of film satellite rights during the original assessment proceedings u/s.143(3). They contended that the Assessing Officer had no reason to believe that income had escaped assessment as full and true disclosure had been made. The reopening of assessment was challenged on the grounds of lack of failure to disclose material facts.

4. Change of opinion:
The assessee contended that the reassessment was based on a mere change of opinion without any fresh material. They argued that the Assessing Officer did not have a valid reason to believe that income had escaped assessment, especially since the nature of the expenditure was not doubted in the original assessment. The reopening was deemed invalid due to being based on a change of opinion.

5. Doctrine of Merger:
The doctrine of merger was invoked by the assessee, arguing that since the original assessment had merged with the order of the Commissioner of Income Tax (Appeals), the reopening of assessment u/s.147 was not valid. The assessment could not have been reopened in respect of the same items as the order had already merged with the appellate order.

In conclusion, the Appellate Tribunal quashed the reassessment order made u/s.147 as the essential condition for reopening the assessment was absent. The cross objection filed by the assessee was allowed, rendering the Revenue's appeal infructuous and dismissed.