2021 (9) TMI 352 - AT - Income Tax

Validity of Reopening of assessment - whether no justifiable reason for the AO to reopen the assessment in this case? - HELD THAT - Since, the Department has miserably failed to show that there were any cogent and convincing reasons for the Assessing Officer to form belief that the income of the assessee has escaped the assessment or that there was any escapement of income because of the failure on the part of the assessee to disclose fully and truly all material facts. Since no document showing the compliance of the above mandatorily requirements for reopening of the assessment u/s 147 r.w.r 148 of the Act has been produced on the file, therefore, we hold that the reopening of the assessment, in this case, is bad in law. Accordingly, the impugned assessment order passed u/s 147 of the Act is hereby quashed. - Decided in favour of assessee.

Summary

Issues:
1. Validity of reopening of assessment u/s 147 r.w.s 148 of the Income Tax Act.
2. Failure to disclose material facts necessary for assessment.
3. Non-supply of reasons recorded by the Assessing Officer for reopening of the assessment.

Analysis:
Issue 1: The appellant contested the validity of the reopening of the assessment u/s 147 r.w.s 148 of the Income Tax Act, arguing that the notice was issued after the four-year limit following the completion of the original assessment u/s 143(3) of the Act. The appellant highlighted that the notice was delivered after six years, making it time-barred. The appellant also pointed out that the notice did not allege any income had escaped assessment due to the failure to disclose material facts. Despite repeated requests, the reasons recorded by the Assessing Officer were not provided to the appellant.

Issue 2: The appellant emphasized that the original assessment order was framed u/s 143(3), and all material facts were disclosed fully and truly. The appellant argued that the reassessment proceedings were illegal and should be quashed as the Assessing Officer took action against the appellant u/s 147 after four years without valid reasons. Additionally, the appellant raised concerns about the notice of demand being erroneous due to the Assessing Officer not giving effect to the rectification application u/s 154.

Issue 3: The appellant repeatedly requested the reasons recorded by the Assessing Officer for reopening the assessment but was not provided with the same despite various applications and orders. The Tribunal directed the Department to produce assessment records and reasons recorded, but the Department failed to comply. The Tribunal noted that without cogent reasons for reopening the assessment, the action was deemed bad in law, leading to the quashing of the assessment order.

In conclusion, the Tribunal allowed the appeal of the assessee, holding that the reopening of the assessment was invalid due to the lack of justifiable reasons and failure to disclose material facts necessary for assessment. The Tribunal emphasized the importance of compliance with legal requirements for reopening assessments and the provision of reasons recorded by the Assessing Officer to ensure transparency and fairness in the assessment process.