2023 (5) TMI 1039 - AT - Income Tax

Reopening of assessment u/s 147 - Addition u/s 68 - unexplained credits in the books of account of the assessee being share application money received - whether the Assessee could be stated to have disclosed fully and truly all material facts has to be examined in the light of facts of each case? - HELD THAT - Requirement of first proviso are not met for multiple reasons namely, the allegation of failure to disclose facts of material nature is non-descript and obscure and is merely an iteration of statutory language; it is not known what primary facts of substantive nature were not 'disclosed' which were in the knowledge of the Assessee; which specific fact disclosed were found to be untrue later on. Allegation that the share application received are accommodation entries without further corroborative facts is by itself insufficient to allege the escapement in terms of first proviso. Withholding the material facts which is in the knowledge of Assessee is one of the conditions precedent to lift the embargo of limitation placed under the first proviso. Importantly, such failure of the assessee to disclose material facts contemplated in first proviso to S. 147 has to be judged in the context of proceedings of the same year i.e. AY 2009-10 and not with reference to some enquiry in subsequent AY 2010-11. Any alleged failure in some other assessment year would not meet the requirement of first proviso to S. 147 with reference to reopening of some other year. From the body of reasons recorded for AY 2009-10 in question, it can not be deciphered as to what material facts in relation to share application money were withheld by the Assessee in AY 2009-10 in question. An alleged non-compliance of summons issued in some other years cannot be reckoned as 'failure on the part of assessee' and that too in some other assessment year. An enquiry was made in relation to share application money recd. while framing regular assessment of AY 2009-10 and assessment was framed taking note of outcome of such enquiry. Hence, mere reproduction of statutory language of first proviso would not meet the requirement of law for extension of limitation period beyond 4 years. When seen holistically, the conclusion is inescapable that the AO has failed to satisfy the pre-requisites of main provision of S. 147 and also first proviso thereto. The jurisdiction assumed thus is clearly without legal foundation. The notice issued u/s 148 to reopen the completed assessment is thus without jurisdiction and consequently, the reassessment order is bad in law and thus quashed. Decided in favour of assessee.

Summary

Issues Involved:

1. Validity of assumption of jurisdiction under Section 147 of the Income Tax Act, 1961.
2. Merits of additions made under Section 68 of the Income Tax Act, 1961.

Summary:

1. Validity of Assumption of Jurisdiction under Section 147:

The Assessee challenged the assumption of jurisdiction under Section 147, arguing that the notice for reopening was issued beyond four years from the end of the assessment year 2009-10 and was thus time-barred. The Assessee contended that the reasons recorded for reopening did not meet the legal requirements and that the approval given under Section 151 was mechanical. The Tribunal noted that Section 147 is a substantive provision with inbuilt safeguards, requiring adherence to conditions for assuming jurisdiction. The reasons for reopening were found to be based on general observations and a note from the subsequent assessment year (AY 2010-11), which did not provide specific material against the Assessee. The Tribunal held that the reasons recorded were vague and did not indicate any specific material to dislodge the bona fides of the Assessee. The reopening was deemed to be based on a mere suspicion rather than a "reason to believe," failing the requirements of Section 147.

2. Merits of Additions under Section 68:

The Assessee argued that the additions made under Section 68, pertaining to unexplained credits in the form of share application money, were based on surmises and assumptions without corroborative evidence. The Tribunal observed that the original assessment proceedings had involved detailed inquiries under Section 133(6) with the share applicants, and the assessment was framed after considering the replies and documents submitted. The Tribunal found that the reasons for reopening did not specify any failure on the part of the Assessee to disclose material facts fully and truly. The Tribunal concluded that the conditions for reopening, particularly the requirement of tangible material, were not met, rendering the reassessment order invalid.

Conclusion:

The Tribunal quashed the reassessment order, holding that the notice issued under Section 148 was without jurisdiction. Consequently, the appeal of the Assessee was allowed, and the Tribunal did not delve into the merits of the additions. The order was pronounced in the open Court on 27/04/2023.