Tribunal partially allowed appeal, deeming reassessment illegal, voiding assessment order under section 148.

The Tribunal allowed the appeal in part, ruling that the initiation of reassessment proceedings by the AO was not legal and quashing the notice issued under section 148. The assessment order was deemed void, and there was no need to address other grounds related to the disallowance of loss.

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Issues Involved:
1. Violation of principles of natural justice by CIT(A).
2. Legality of reopening the completed assessment under section 147 of the Income Tax Act, 1961.
3. Validity of reassessment under section 147 when AO did not dispose of the assessee's objections by a speaking order.

Issue-wise Detailed Analysis:

1. Violation of principles of natural justice by CIT(A):
The appellant's first ground of appeal was that the CIT(A) passed the order under section 250 of the Act in gross violation of the principles of natural justice. However, during the hearing, the appellant's representative did not press for this ground. Consequently, this ground was dismissed as not pressed.

2. Legality of reopening the completed assessment under section 147 of the Income Tax Act, 1961:
The assessee, engaged in the contract business of building roads, bridges, tunnels, etc., filed its return of income for the assessment year 2003-04, which was initially assessed under section 143(3). The AO later initiated reassessment proceedings under section 147, citing reasons to believe that income had escaped assessment due to an excessive claim of anticipated loss on four projects. The AO issued a notice under section 148 on 31.3.2010.

The assessee contended that the reopening was beyond the four-year time limit from the end of the assessment year 2003-04 and that all material facts had been disclosed during the original assessment. The CIT(A) upheld the AO's action, stating that the disclosure in the notes to the accounts was not full and true or considered by the AO in the original assessment.

The Tribunal noted that the original assessment was made under section 143(3) and that the reassessment proceedings were initiated after four years from the end of the relevant assessment year. According to the proviso to section 147, no action can be taken after four years unless there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal observed that the AO did not specify what material facts were not disclosed by the assessee. Citing the decisions of the Hon'ble Bombay High Court and the Hon'ble Supreme Court, the Tribunal concluded that the AO's failure to apply his mind to the material facts at the time of the original assessment could not justify the reopening of the assessment. Therefore, the initiation of reassessment proceedings was held to be invalid, and the notice issued under section 148 was quashed.

3. Validity of reassessment under section 147 when AO did not dispose of the assessee's objections by a speaking order:
The assessee argued that the reassessment was invalid as the AO did not dispose of the objections to the reopening by a speaking order. The Tribunal did not find it necessary to address this issue separately, as the initiation of reassessment proceedings itself was held to be invalid.

Conclusion:
The Tribunal allowed the appeal in part, holding that the initiation of reassessment proceedings by the AO was not legal and quashing the notice issued under section 148. Consequently, the assessment order was void, and there was no need to address the other grounds of appeal related to the disallowance of loss. The order was pronounced in the open court on 22nd May, 2013.

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