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TMI Blog2016 (4) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... djudicate the jurisdictional issue i. e. re-opening of the assessment. Assessee-company, engaged in the business of manufacturing of locks, security equipments, refrigerators and washing machine etc. , filed its return of income on 29. 10. 2204, declaring income of Rs. NIL. The Assessing officer(AO)completed the assessment, on 26. 12. 2006, determining the income of the assessee at Rs. NIL. However, under the MAT provisions income was assessed at Rs. 3. 21 Crores. Later on, a notice u/s. 148 was issued to re-open the assessment after recording the following reasons: "In this case, assessment u/s 143(3) was completed on 26. 12. 2006 assessing the total income at Rs. Nil. Assessee was assessed on the Book Profit u/s. 115JB at Rs. 3, 21, 19, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Authority(FAA). Before, him it was argued that the assessee had raised objection to the reopening, that the AO had not disposed off the said objection and completed the reassessment, that AO had proceeded on a completely wrong premises that provisions for leave encashment and bad and doubtful debt should have been added to net profit while computing profit u/s. 115JB, that the reassessment notice was bad in law, that information was already on the tax record of the assessee maintained by the department at the time of original assessment, that no additional objective fact of material came into possession of the AO after original assessment was passed , that it was a case of change of opinion, that notice u/s. 148 was issued on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice contract and leave encashment, that the AO had informed the audit people that provisions were not for unascertained liability, that there could not be any reason to believe for re-opening the assessment in those circumstances, that the audit party had raised objection about exempt income also, that during the course of assessment the AO had discussed the disallowance u/s. 14A of the Act, that the AO could not have benefit of inadvertent mistakes, that the AO had applied his mind for calculating disallowance under section 14A and for computing of income u/s. 115JB of the Act, that it was a case of change of opinion, that there was no failure on part of the assessee to disclose truly and fully the material facts, that reassessment proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and truly all material facts relevant for the assessment of the assessment year in question. In other words, merely having a reason to believe that income had escaped assessment is not sufficient to reopen assessments beyond the period of four years. The escapement of income must also be occasioned by the failure on the part of the assessee to disclose material facts fully and truly. This is a necessary condition for overcoming the bar set by the proviso to section 147 and if this condition is not satisfied, the bar would operate and action taken under section 147 would be invalid. It is not the case of the AO that there was any omission or failure on the part of the assessee to disclose fully and truly all material facts relevant for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome(emphasis by us)......" Considering the above discussion, judgment of the Hon'ble Madras High Court and the fact that the AO had not proved that the escapement of income was result of failure on part of the assessee to disclose fully and truly the material facts for making the assessment, we hold that the reopening was not valid. Effective ground of appeal (GOA-3)is decided in favour of the assessee. The other arguments like change of opinion or re-opening was based on an audit objection are not being decided, as there is basic legal flaw in re-opening. The AO has not mentioned that the assessee had failed to disclose material fact. Proving of the said fact is the next stage. Therefore, as stated earlier, we hold that notice issued u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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