2022 (5) TMI 1091 - AT - Income Tax

Reopening of assessment u/s 147 - reopening made beyond four years - provision for bad and doubtful debtor shown under the head administration expense in the profit and loss account are to be added to the income beside considering the same for the purpose of computing book profit u/s 115JB and the assessee has wrongly been allowed deduction u/s 80IA(4)(iii) in respect of Salarpuria Touchstone project - HELD THAT - We note that on the basis of above reasons recorded that all the information were duly disclosed in the books of account, audited financial statement and return of income filed by the assessee and it cannot be construed as in respect of which the assessee has not truly and fully disclosed all the material facts leading to escapement of income. In fact, the assessee has disclosed all the material facts in respect of two items on the basis of which the AO formed his belief u/s 148 of the Act. Under these facts and circumstances, we find merits in the contentions of the Ld. A.R. that the reopening was made in violation to provisions as contained in first proviso to section 147 of the act which stipulates that reopening cannot be made where the assessment was framed u/s 143(3) after a period of four years from the end of relevant assessment year if the escapement of income has occurred due to nondisclosure of material facts by the assessee which led to the escapement of the income. In our considered opinion, the reopening of the assessment has been made incorrectly and in violation to 1st proviso to section 147 of the Act and therefore cannot be sustained. The case of the assessee finds support from the decision of co-ordinate bench in the case of Haldia Petrochemicals Ltd. 2021 (4) TMI 383 - ITAT KOLKATA - Also in cases ORIENT CRAFT LTD. 2013 (1) TMI 177 - DELHI HIGH COURT , SOUND CASTING PVT. LTD 2012 (4) TMI 248 - BOMBAY HIGH COURT , TAO PUBLISHING (P.) LTD. 2015 (1) TMI 1162 - BOMBAY HIGH COURT and HARYANA ACRYLIC MANUFACTURING COMPANY 2008 (11) TMI 2 - DELHI HIGH COURT which held the reopening made beyond four years has to be in accordance with the first proviso to section 147 of the Act failing which the reopening as well as reassessment order are bad in law. We, therefore respectfully following the above legal position , quash the reassessment proceedings u/s 147 as well as the consequent order framed by the AO - Decided in favour of assessee.

Summary

Issues:
Challenge to order of Commissioner of Income Tax (Appeals) on legal and merit grounds, jurisdictional issue regarding reopening of assessment.

Analysis:
1. The appellant challenged the order of the Commissioner of Income Tax (Appeals) on legal and merit grounds, specifically focusing on jurisdictional issues related to the reopening of the assessment. The appellant contended that the proceedings under section 147 of the Income Tax Act were not correctly initiated by the Assessing Officer (AO) in compliance with the first proviso to section 147 of the Act.

2. The case involved the reassessment of the appellant's income for the assessment year 2009-10. The AO reopened the assessment based on two main reasons: firstly, the provision for bad and doubtful debtors was not considered for computing the book profit under section 115JB of the Act; and secondly, the appellant wrongly claimed a deduction under section 80IA for a specific project. The reassessment order was passed under sections 147/143(3) of the Act.

3. The Commissioner of Income Tax (Appeals) dismissed the appellant's appeal on jurisdictional/legal grounds, stating that the AO had a bona fide belief supported by available information, and had followed due process in reopening the assessment.

4. The appellant argued that the reassessment was initiated by the AO without meeting the conditions specified in the first proviso to section 147 of the Act. The appellant contended that all material facts were fully disclosed in the original return of income, and therefore, the reassessment proceedings should be quashed. The appellant relied on relevant case law to support their argument.

5. After considering the arguments from both sides, the Appellate Tribunal found merit in the appellant's contentions. The Tribunal observed that the reassessment was made incorrectly and in violation of the first proviso to section 147 of the Act. The Tribunal referred to previous decisions and legal precedents to support their decision to quash the reassessment proceedings and the consequent order framed by the AO.

6. As a result of the Tribunal's decision on the legal issue, the appeal of the appellant was allowed. The Tribunal pronounced the order in open court on 13th May 2022. The grounds raised on merit were not adjudicated at that stage, leaving them open for future consideration if necessary.