2022 (10) TMI 623 - AT - Income Tax

Reopening of assessment u/s 147 - Notice beyond period of four years - whether any reasons recorded that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for framing of assessment for the relevant assessment year? - HELD THAT - We are of the view that the reopening is beyond 4 years and as the original assessment was framed u/s. 143(3) of the Act, the Revenue could not establish any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, the reopening in present case is bad in law and hence, quashed. Since we have quashed the reassessment on reopening, we need not to go into the merits of the case. Decided in favour of assessee.

Summary

Issues:
1. Reopening of assessment u/s. 147 r.w.s 148 of the Act without failure to disclose fully and truly the material fact.

Analysis:
The case involved an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) confirming the reopening of assessment for the assessment year 2011-12 under section 147 of the Income-Tax Act, 1961. The primary issue was whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The original assessment was completed under section 143(3) of the Act, and the reassessment was initiated based on the claim of other expenditure made by the assessee towards provision for return rights. The Appellate Tribunal analyzed the grounds raised by the assessee and the arguments presented by both parties.

The CIT(A) upheld the reopening of assessment under the presumption of change of opinion, despite the assessee's contention that there was no failure to disclose material facts. The Tribunal noted that the assessee had provided detailed explanations and justifications for the provision made for return rights during the original assessment. The Tribunal emphasized that the AO did not demonstrate any failure on the part of the assessee to disclose material facts, as the original assessment had considered and accepted the provisions made. The Tribunal referred to relevant legal provisions and past judgments to support its decision.

The Tribunal observed that the reopening of assessment beyond four years and without establishing any failure to disclose material facts rendered the reassessment invalid. Citing the proviso to section 147 of the Income-Tax Act, the Tribunal concluded that the reassessment was not legally sustainable. As the Revenue failed to show any failure on the part of the assessee in disclosing material facts, the Tribunal allowed the appeal filed by the assessee, thereby quashing the reassessment. The Tribunal's decision highlighted the importance of adhering to legal provisions and established principles in reopening assessments to ensure fairness and compliance with the law.

In conclusion, the Tribunal's detailed analysis focused on the legality of reopening the assessment under section 147 without establishing any failure on the part of the assessee to disclose material facts. The decision underscored the significance of adhering to statutory provisions and past judicial interpretations in conducting reassessments to maintain the integrity and fairness of the assessment process.