2022 (1) TMI 1049 - AT - Income Tax

Validity of Reopening of assessment u/s 147 - assessee bank has reduced the interest credited from the interest on securities for the assessment year 1989-90 as interest accrued but not received - HELD THAT - Assessment was framed by the AO u/s.143(3) of the Act and all these details were available before the AO during the original assessment proceedings. The AR particularly took us through the Memo of income adjusted for income tax purposes and drew our attention to Page 57 of assessee s paperbook, where depreciation (loss on revaluation) of investments and interest on investments on Government and other securities accrued but not received is disclosed. Even, depreciation (loss on revaluation) of investments as on 31.03.1990 is disclosed - The assessee has also computed Interest on securities on due and realisation basis and computed the entire amount which is enclosed in assessee s paperbook -We noted that these are sufficient details and sufficient disclosure for framing of assessment because these details were available before AO during original assessment proceedings. Once assessment is framed u/s.143(3) of the Act originally for assessment year 1990-91 and reopening notice dated 04.03.1997, which is beyond 4 years and there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, the reopening cannot be held to be valid As per Hon ble Supreme Court in the case of M/s. Foramer France and Jurisdictional High Court in the case of M/s. RPG Transmissions Ltd 2003 (1) TMI 101 - SC ORDER we are of the view that there is no whisper in the reasons recorded that there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment and the assessment was framed u/s.143(3) of the Act and reopening beyond 4 years which is against the provisions of the Act. Accordingly, we quash the reassessment proceedings and allow the appeal of the assessee.

Issues Involved:
1. Validity of reopening of assessment under Section 147 of the Income Tax Act.
2. Failure of the assessee to disclose fully and truly all material facts necessary for assessment.
3. Applicability of the proviso to Section 147 of the Income Tax Act.
4. Change of opinion by the Assessing Officer (AO).

Detailed Analysis:

1. Validity of reopening of assessment under Section 147 of the Income Tax Act:
The first common issue in these appeals concerns the order of the Commissioner of Income Tax (Appeals) [CIT(A)] confirming the action of the Assessing Officer (AO) in upholding the reopening of assessment. The original assessments for the assessment years 1990-91 and 1991-92 were completed under Section 143(3) of the Act. However, the assessments were reopened beyond four years, which was challenged by the assessee. The Tribunal was directed by the Hon’ble Madras High Court to decide the validity of the reopening proceedings on merits and in accordance with law. The reasons recorded for reopening the assessment included the reduction of ‘interest accrued due but not received’ from the interest credited to the profit and loss account and the claim of notional loss on account of depreciation on investment.

2. Failure of the assessee to disclose fully and truly all material facts necessary for assessment:
The assessee argued that all facts relating to interest on securities, interest accrued but not received, and the claim of depreciation on investment were disclosed during the original assessment proceedings. The Tribunal noted that the details were available before the AO during the original assessment proceedings, including the ‘Memo of income adjusted for income tax purposes’ and notes to the computation of income. The Tribunal found that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment.

3. Applicability of the proviso to Section 147 of the Income Tax Act:
The Tribunal emphasized that the reopening of assessment beyond four years is valid only if there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The Tribunal referred to the decision of the Hon’ble Supreme Court in the case of CIT vs. Foramer France and the Hon’ble Madras High Court in the case of CIT vs. RPG Transmissions Ltd., which supported the assessee's contention. The Tribunal concluded that the reopening of assessment was not valid as there was no failure on the part of the assessee to disclose all material facts.

4. Change of opinion by the Assessing Officer (AO):
The Tribunal noted that the AO had considered the same issues during the original assessment proceedings, and hence, the reopening of assessment amounted to a change of opinion, which is not permissible under the law. Since the Tribunal quashed the reopening of assessment based on the applicability of the proviso to Section 147, it did not delve into other aspects, including the change of opinion.

Conclusion:
The Tribunal quashed the reassessment proceedings for both assessment years 1990-91 and 1991-92, holding that the reopening of assessment was invalid as it was beyond four years and there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Consequently, the appeals of the assessee were allowed.

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