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2025 (2) TMI 155 - AT - Income TaxReopening of assessment u/s 147 - Reason to believe - notice after four years from the end of relevant assessment year - HELD THAT - The proceedings beyond the period of four years from the end of A.Y. 2009-10 without complying the requirements of proviso to section 147 of the Act the learned AO has no jurisdiction to reopen the assessment proceedings which were concluded on basis of assessment under section 143(3) of the Act. On this score alone the impugned orders of learned AO and CIT(A) are liable to be quashed and are set aside. Decided in favour of assessee.
ISSUES PRESENTED and CONSIDERED
The primary issue considered in this judgment is whether the reopening of the assessment under Section 147 of the Income Tax Act, 1961, after four years from the end of the relevant assessment year, was justified and legally valid. The core legal question revolves around whether the conditions precedent for such reopening, as stipulated in the proviso to Section 147, were satisfied. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents Section 147 of the Income Tax Act, 1961, allows for the reopening of an assessment if the Assessing Officer (AO) has reason to believe that income chargeable to tax has escaped assessment. However, the proviso to Section 147 imposes additional conditions if the reopening is sought after four years from the end of the relevant assessment year. In such cases, it must be established that the escapement of income was due to the assessee's failure to make a return under Section 139 or to disclose fully and truly all material facts necessary for the assessment. The judgment refers to precedents from the High Courts, including Wel Intertrade (P.) Ltd. & Anr. Vs. Income Tax Officer and Hindustan Lever Ltd. vs. R. B. Wadkar, which emphasize the necessity for the AO to clearly record reasons indicating the assessee's failure to disclose material facts, thereby justifying the reopening of assessments beyond the four-year period. Court's Interpretation and Reasoning The Tribunal examined the reasons recorded by the AO for reopening the assessment. It noted that the reasons did not indicate any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal emphasized that the reasons must be explicit and self-explanatory, and any ambiguity or lack of clarity would render the reopening invalid. The Tribunal relied on the principles established in the cited precedents, particularly the necessity for the AO to manifest his reasons clearly and link them to specific failures by the assessee. The Tribunal found that the AO's reasons lacked such specificity and clarity. Key Evidence and Findings The Tribunal found that the original assessment for the relevant year was completed under Section 143(3), and the reopening was initiated based on information received much later. However, the reasons recorded by the AO did not demonstrate any specific failure by the assessee to disclose material facts, as required by the proviso to Section 147. Application of Law to Facts Applying the legal framework to the facts, the Tribunal concluded that the reopening of the assessment was not justified. The absence of specific reasons indicating the assessee's failure to disclose material facts meant that the conditions for reopening after four years were not met. Consequently, the Tribunal held that the AO lacked jurisdiction to reopen the assessment. Treatment of Competing Arguments The Tribunal considered the arguments presented by both the assessee's representative and the Departmental Representative. While the Departmental Representative relied on the CIT(A)'s discussion, the Tribunal found the assessee's arguments, supported by relevant judicial precedents, more persuasive. The Tribunal agreed with the assessee that the reasons recorded by the AO were insufficient to justify the reopening of the assessment. Conclusions The Tribunal concluded that the reopening of the assessment was invalid due to non-compliance with the proviso to Section 147. The absence of specific reasons indicating the assessee's failure to disclose material facts rendered the reopening beyond the four-year period unjustified. Consequently, the Tribunal allowed the appeal, quashing the orders of the AO and the CIT(A). SIGNIFICANT HOLDINGS The Tribunal held that the reopening of an assessment beyond four years requires clear and explicit reasons demonstrating the assessee's failure to disclose material facts. The Tribunal emphasized that the reasons recorded by the AO must be self-explanatory and free from ambiguity. In its final determination, the Tribunal quashed the impugned orders of the AO and CIT(A), allowing the appeal on the grounds that the reopening of the assessment was without jurisdiction.
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