2020 (9) TMI 1139 - HC - Income Tax

Reopening of assessment u/s 147 - whether AO recorded any reason for the failure on the part of the assessee to disclose fully and truly all material facts? - HELD THAT - Substantial portion deals with the statement of law as to how the re-assessment proceedings have to be done and as to how the Courts have interpreted the procedure to be followed by the AO while exercising the powers u/s 147 - Tribunal did not spell out as to how it came to the conclusion that the Assessing Officer did not record any failure on the part of the assessee to disclose fully and truly any material facts necessary for its assessment. Assessee as accepted notice for the respondent assessee, on instructions, submits that substantial material was placed before the Tribunal and merely because the Tribunal had not recorded those submissions nor brought on record the materials, the assessee should not be put to prejudice. An order passed by a Court or a Tribunal should stand or fall based on the reasons contained in that order. The order cannot be substituted by reasons at the appellate stage when the same did not find place in the original order. This legal principle has been well explained in the celebrated judgment in the case of Mohinder Singh Gill Vs. Chief Election Commissioner 1977 (12) TMI 138 - SUPREME COURT We would not be justified in making any observations on the merits of the matter as to whether the reasons have been recorded or not. All that we can say is that the assessment order as well as the order passed by the CIT(A) are speaking orders. If the Tribunal comes to the conclusion that the Assessing Officer has not recorded any failure on the part of the assessee to disclose fully and truly any material facts necessary for its assessment, it is required that the Tribunal expresses itself as to how it formed such a opinion. In the absence of any such reasons emanating from the impugned order, we have to necessarily hold that the impugned order passed by the Tribunal is devoid of reasons and would call for interference. For all the above reasons, we are inclined to interfere with the impugned order. As mentioned earlier, we do not want to express anything on the merits of the matter as it may prejudice the interest of the assessee. Tax case appeal is allowed, the impugned order is set aside and the matter is remanded to the Tribunal for a fresh consideration.

Summary

Issues:
- Validity of reopening of assessment under Section 147
- Failure to disclose fully and truly all material facts

Analysis:
1. Validity of Reopening of Assessment under Section 147:
The appeal was filed by the Revenue challenging the order of the Income Tax Appellate Tribunal, which held the reopening of assessment as illegal. The Assessing Officer reopened the assessment for the assessment year 2008-09 under Section 147, stating that certain assets were not transferred during the sale of Customer Care Parts Division, and the provision for warranty was not estimated using a scientific method. The Tribunal allowed the assessee's appeal, emphasizing that the notice was issued after the completion of the scrutiny assessment, beyond the four-year limit, and without recording any failure on the part of the assessee to disclose material facts. However, the High Court criticized the Tribunal's order for lacking reasons and remanded the matter for fresh consideration, emphasizing that an order should stand or fall based on the reasons contained in it.

2. Failure to Disclose Fully and Truly All Material Facts:
The crux of the matter was whether the assessee failed to disclose all material facts necessary for assessment. The Tribunal's decision was based on the absence of failure recorded by the Assessing Officer in this regard. The High Court highlighted the need for the Tribunal to express how it formed the opinion that there was no failure on the part of the assessee to disclose material facts. It was noted that both the assessment order and the order by the Commissioner of Income Tax (Appeals) were speaking orders, but the Tribunal's order lacked reasoning, leading to the interference by the High Court. The matter was remanded for fresh consideration, emphasizing the importance of providing detailed reasons in judicial orders to avoid prejudice to any party.