2020 (12) TMI 1031 - AT - Income Tax

Reopening of assessment u/s 147 - Eligibility of reasons to believe - HELD THAT - As during the course of original assessment proceedings, on the issue of allowability the assessee had disclosed the information to the AO and thus it would appear that assessee had disclosed the primary facts at its disposal to the Assessing Officer for the purpose of assessment. In such circumstances, it cannot be said that assessee did not disclose fully and truly all material facts necessary for the assessment. Consequently, the AO could not have arrived at the satisfaction that he had reasons to believe that income chargeable to tax had escaped assessment. In the absence of the same, the AO could not have assumed jurisdiction and issued the impugned notice under section 148 of the Act. Even on the reading of the reasons recorded, it cannot be said that it suggests about any failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment. A claim which has been allowed in the original assessment proceedings after examination of the relevant details and facts cannot be amenable to provisions of Section 147/148. In the present case, notice for re-opening of the assessment u/s 147 of the Act is not as per the mandate of Sec.147 of the Act and therefore the re-opening is not permissible. We are therefore of the view that the notice issued for re-opening has to be set aside and the same deserves to be quashed.

Issues:
1. Validity of reassessment proceedings under section 147 of the Income Tax Act 1961.
2. Allegation of change of opinion in initiating reassessment parallelly with pending proceedings under section 154.
3. Addition of &8377; 19,22,905 on account of prior period expenditure/reversal of consultancy fee.
4. Observations and upholding of additions by the CIT(A).
5. Disallowance of appellant's claim for brought forward losses.
6. Disallowance of claim for tax deducted at source of &8377; 31,32,351 while filing the return of income.

Analysis:

Issue 1: Validity of reassessment proceedings under section 147
The Appellate Tribunal noted that the Assessing Officer can only re-open an assessment in accordance with the provisions of Section 147/148 of the Act. It was highlighted that for re-opening an assessment beyond four years, the Assessee must have failed to fully and truly disclose all material facts necessary for assessment. In this case, the notice under section 148 was issued after four years without any allegation of failure to disclose material facts by the Assessee. Therefore, the Tribunal held that the re-opening of the assessment was not permissible and set aside the reassessment proceedings for Assessment Year 2006-07.

Issue 2: Allegation of change of opinion and parallel proceedings
The Assessee argued that the reassessment was based on a change of opinion as the claim in question had been examined and allowed during the original assessment proceedings. The Tribunal agreed with the Assessee's contention and held that the reassessment based on the same issue already examined amounted to a change of opinion, which is impermissible under the Act.

Issue 3: Addition of prior period expenditure/reversal of consultancy fee
The Tribunal found that the Assessee had disclosed the necessary information during the original assessment proceedings regarding the claim in question. As the Assessee had fully and truly disclosed all material facts, the Tribunal concluded that the addition made by the Assessing Officer was not justified.

Issue 4: Observations and upholding of additions by the CIT(A)
The Tribunal disagreed with the observations and conclusions made by the CIT(A) regarding the Assessee's failure to explain certain aspects. It was held that the Assessee had provided relevant details during the original assessment proceedings, and the additions made were not sustainable.

Issue 5: Disallowance of appellant's claim for brought forward losses
The Tribunal noted that the issue of the Assessee's claim for brought forward losses did not arise from the order being challenged. Therefore, this issue was not considered for adjudication.

Issue 6: Disallowance of claim for tax deducted at source
The Tribunal found that the Assessee's claim for tax deducted at source was not allowed by the CIT(A). However, due to the decision to set aside the reassessment proceedings, the Tribunal did not delve into this issue further.

In conclusion, the Appellate Tribunal allowed the appeal of the Assessee, quashed the reassessment proceedings, and set aside the assessment framed under section 143(3) read with section 147 of the Act for Assessment Year 2006-07.

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