2021 (4) TMI 383 - AT - Income Tax

Reopening of assessment u/s 147 - re-opening of assessment was beyond four years from end of assessment year - HELD THAT - Admittedly, the re-opening of assessment is after the expiry of four years from the end of assessment year 2008-09 and hence the proviso to Section 147 of the Act comes into play. A reading of the reasons recorded for re-opening of assessment shows that there is no allegation made, that there is failure on the part of the assessee to truly and fully disclose material facts necessary for the assessment. Under these circumstances, we have to hold that the re-opening of assessment is bad in law. Thus we hold that the re-opening is bad in law. In the result, the impugned assessment order is hereby quashed.

Summary

Issues:
Validity of re-opening of assessment beyond four years under Section 147 of the Income Tax Act, 1961 due to failure to disclose material facts.

Analysis:
The appeal challenged the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2008-09 regarding the re-opening of assessment under Section 147 of the Income Tax Act. The original assessment was completed under Section 143(3) of the Act on 29.12.2010, and a notice for re-opening was issued on 13.12.2015. The reasons for re-opening highlighted discrepancies in the treatment of VAT adjustments in the accounts. The key contention was the failure to fully and truly disclose material facts necessary for assessment as required by the proviso to Section 147. The Assessing Officer did not allege any such failure in the reasons recorded for re-opening, leading to the conclusion that the re-opening of assessment was beyond the permissible period and thus bad in law.

The Tribunal referred to various legal precedents, including judgments from the Bombay High Court, Delhi High Court, and Kolkata Bench, emphasizing the importance of full and true disclosure of material facts by the assessee for a valid re-opening of assessment beyond four years. The absence of any allegation of failure to disclose material facts in the reasons for re-opening rendered the assessment beyond the prescribed period invalid. The Tribunal held that the re-opening was based on the same material as the original assessment and did not involve a change of opinion by the Assessing Officer. Therefore, the re-opening was deemed bad in law, and the assessment was quashed, allowing the appeal of the assessee.

In conclusion, the Tribunal ruled that the re-opening of assessment beyond four years due to the alleged failure to disclose material facts was not valid as per the provisions of the Income Tax Act. The absence of any such failure allegation in the reasons for re-opening rendered the assessment legally unsustainable. The Tribunal relied on established legal principles and precedents to uphold the appeal and quash the assessment, emphasizing the importance of adherence to statutory requirements for re-opening assessments under Section 147.