2019 (12) TMI 901 - AT - Income Tax

Reopening of assessment u/s 147 - recomputing the book profits of the assessee us/ 115JB - HELD THAT - As per the first proviso to sec. 147 of the Act an action u/s 147 can be taken in a case where an assessment was already completed u/s 143(3) of the Act within the period of 4 years from the end of relevant asst. year. However, if there is failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment. year then the notice u/s 148 of the Act can be issued within a period of 6 years from the end of the relevant asst. year. The question therefore is as to whether it can be said in the present case that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. In this regard it is clear from the perusal of the order passed u/s 143(3) of the Act that same item which have not been added to the book profits u/s 115JB were added in the originally concluded assessment. proceedings u/s 143(3) of the Act when the total income of the assessee was computed under the normal provisions of the Act. Therefore, it cannot be said that there was any failure on the part of the assessee to fully and truly disclose all material facts necessary for his assessment. There was no failure on the part of the assessee to fully and truly disclose material facts, the reopening of the assessment u/s 147 beyond the period of 4 years is not valid. Consequently the order of re-assessment u/s 147 of the Act is liable to be annulled on this ground and is hereby annulled. In view of the decision on the aforesaid ground on the validity of initiation of proceedings u/s 147 of the Act, the issues on merits of the appeal of the assessee are not being considered.

Issues Involved:
1. Validity of initiation of proceedings for reassessment under Section 147 of the Income Tax Act, 1961.
2. Justification of recomputing the book profits of the assessee under Section 115JB of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Validity of Initiation of Proceedings for Reassessment under Section 147 of the Income Tax Act, 1961
The primary contention of the assessee was that the reassessment proceedings initiated under Section 147 were not valid. The assessee argued that the first proviso to Section 147 stipulates that no action under this section shall be taken after the expiry of four years from the end of the relevant assessment year unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. In this case, the original assessment under Section 143(3) was completed on 26.02.2013, and the reassessment notice under Section 148 was issued on 30.03.2017, which is beyond the four-year limit.

The assessee pointed out that during the original assessment, all material facts, including the write-off of investments and the provision for obsolete inventory, were fully and truly disclosed. These items were considered and disallowed while computing the total income under the normal provisions of the Act. Therefore, the reassessment notice was time-barred as it was issued after the expiry of four years without any failure on the part of the assessee to disclose material facts.

The Tribunal observed that the reassessment proceedings were initiated based on the same items that were already considered during the original assessment under Section 143(3). Hence, there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal cited several judicial pronouncements supporting the assessee's contention, including:
1. MSEB Holding Co. Ltd. Vs. DCIT, 102 Taxmann.com 208 (Bom.)
2. Gujarat ECO Textile Park Ltd. Vs. ACIT 60 Taxmann.com 296 (Bom.)
3. Sun Investment Pvt. Ltd. Vs ACIT, 344 ITR 1 (Delhi)
4. CIT Vs. Mysore Cements Ltd., 35 Taxmann.com 294 (Kar)

Based on these judicial precedents and the facts of the case, the Tribunal concluded that the reopening of the assessment under Section 147 beyond the period of four years was not valid. Consequently, the order of reassessment under Section 147 was annulled.

Issue 2: Justification of Recomputation of Book Profits under Section 115JB of the Income Tax Act, 1961
Given the Tribunal's decision on the validity of the initiation of reassessment proceedings, the issues on the merits of the recomputation of book profits under Section 115JB were not considered. The Tribunal's annulment of the reassessment order rendered the recomputation of book profits moot.

Conclusion:
The appeal of the assessee was allowed, and the reassessment proceedings initiated under Section 147 were annulled due to the invalidity of the notice issued beyond the stipulated four-year period without any failure on the part of the assessee to disclose material facts. The Tribunal did not address the merits of the recomputation of book profits under Section 115JB, as the annulment of the reassessment order resolved the dispute.

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