2024 (12) TMI 36 - AT - Income Tax

Reopening of assessment u/s 147 - Notice beyond period of four years - assessee was beneficiary of accommodation entries from the account maintained in HDFC Bank - HELD THAT - The reopening was made u/s 147 of the Act by issuing notice u/s 148 after the AO received information from DDIT(Inv), Unit-4(1), Kolkata. Therefore, the reopening can only be made subject to the satisfaction of the conditions as provided in first proviso to section 147 which state that where the assessment has been framed u/s 143(3) reopening after a period of four years can only be made if the escapement of income is attributed to the failure on the part of assessee to disclose material facts either in the return of income or during the course of assessment proceedings. This is not the facts in the present case. We note that the assessee has fully disclosed all the facts in the return of income filed u/s 139(1) of the Act and the case was also selected for scrutiny and assessment was framed vide order dated 22.12.2017 passed u/s 143(3). Therefore, non-mentioning on the part of the AO that the reopening beyond four years is made u/s 147 because of the failure on the part of the assessee to disclose fully and truly all the material facts which is necessary for assessment renders the re-assessment proceedings nullity. Reopening of assessment has been made by the AO without recording a concrete and clear-cut findings about the failure of the assessee is bad in law and cannot be sustained. The case of the assessee finds support from the decision of CEAT Ltd. 2023 (1) TMI 73 - SC ORDER wherein held that re-opening u/s 147 of the Act beyond 4 years from the end of the relevant assessment year can only be made if the AO has recorded a finding in the reasons that the escapement is attributable to the failure of the assessee to fully and truly the material facts qua the impugned income and not otherwise - Appeal of the assessee is allowed.

Summary

Issues:
Validity of reopening of assessment under section 147 read with section 148 of the Income Tax Act.
Compliance with the 1st proviso to section 147 regarding the reopening of assessment after four years from the end of the relevant assessment year.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) upholding the assessment order passed under section 147 read with section 144B for Assessment Year 2015-16. The primary issue raised by the assessee was the validity of the reopening of assessment, contending that it was made in violation of the 1st proviso to section 147 of the Act.

The facts revealed that the assessment was initially framed under section 143(3) accepting the returned income, but later reopened under section 147 by the Assessing Officer based on information received regarding accommodation entries. The assessee argued that the notice for reopening was barred by limitation and thus the assessment based on it was invalid. The assessee also challenged the reopening beyond four years from the end of the relevant assessment year, emphasizing the requirement of the assessee's failure to disclose material facts for such reopening.

The Appellate Tribunal noted that the reopening of assessment beyond four years could only be justified if the escapement of income was due to the assessee's failure to disclose material facts. However, in this case, the assessee had fully disclosed all facts during the initial assessment proceedings. The Tribunal referred to the decision of the Honorable Apex Court in ACIT vs. CEAT Ltd., emphasizing the necessity for the Assessing Officer to record findings attributing the escapement to the assessee's failure to disclose material facts.

Consequently, the Tribunal found that the reopening of assessment lacked a clear finding regarding the failure on the part of the assessee to disclose material facts, rendering the reassessment proceedings null and void. Relying on the legal precedent and the specific provisions of the Income Tax Act, the Tribunal allowed the appeal of the assessee, quashing the reopening proceedings and the consequent assessment.

In conclusion, the Tribunal held that the reopening of assessment was invalid and not sustainable in law, ultimately allowing the appeal of the assessee based on legal grounds.