2013 (11) TMI 673 - AT - Income Tax

Tribunal rules reassessment invalid due to lack of evidence, emphasizes AO's need for valid reasons

DCIT., Circle 3(1), Mumbai Versus M/s. The Air Cargo Agents Association of India

The Tribunal dismissed the department's appeal regarding the validity of a notice issued under section 148 for the assessment year 2001-02. The Assessing ... Jurisdiction to issue notice u/s 147 in question – Material available at the time of assessment u/s 143(3) but not considered by AO – Reasons to be recorded for re-opening of assessment – Held that:- Reliance has been placed on the judgment in the case of Titanor Components Ltd. Vs. Asstt. CIT & ors [2011 (6) TMI 138 - Bombay High Court], wherein it was held that if there is no failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment for that assessment year and the assessment is made u/s 143(3) and the initiation of reassessment proceedings beyond 4 years from the end of the relevant assessment year is not justified if there is no allegation in the reasons recorded for reopening the assessment that there was any failure on his part to fully and truly disclose material facts necessary for assessment year. Since the above case squarely applies to the facts of the case, in the reasons recorded by the AO there is no such facts mentioned by the AO that the income chargeable to tax has escaped assessment on account of failure on the part of the assessee to fully and truly disclose material facts necessary for assessment of the year under consideration and the reassessment proceedings is also initiated beyond four years from the end of the assessment year and the earlier assessment was also made u/s 143(3) of the Act, initiation of reassessment proceedings is barred by limitation as per proviso to section 147 of the Act. Therefore, we hold that initiation of reassessment proceedings is not valid – Decided against the Revenue. Issues:Validity of notice under section 148 for assessment year 2001-02.Analysis:The department filed an appeal against the order of the ld. CIT(A) disputing the validity of the notice issued under section 148 by the Assessing Officer for the assessment year 2001-02. The main source of income for the assessee, an association of Air Cargo Agents in India, was membership subscriptions. The Assessing Officer completed the assessment under section 143(3) of the Act, but later initiated reassessment proceedings under section 147 by issuing a notice under section 148. The ld. CIT(A) held that the Assessing Officer had no jurisdiction to assume jurisdiction under section 147, leading to the annulment of the assessment order.During the proceedings, the ld. D.R. failed to provide justification for initiating reassessment proceedings based on failure to disclose material facts. The relevant provisions of section 147 and 148 were examined to determine the validity of the reassessment. The Tribunal observed that the AO must have a reason to believe that income has escaped assessment due to failure by the assessee to fully disclose material facts. The Tribunal referred to the decision in Hindustan Lever Ltd v/s R.B.Wadkar, emphasizing that the reasons recorded must be based on evidence.The Tribunal further discussed the necessity for the AO to disclose facts not fully disclosed by the assessee for a valid reassessment. Citing the decision in CIT vs. Kelvinator of India Ltd, it was emphasized that the AO cannot take advantage of his own failure to apply his mind to the material for reopening assessments. The Tribunal also highlighted the limitations on the AO's power to review his own order, as established in various judicial precedents.Based on the legal principles discussed, the Tribunal concluded that the reassessment proceedings were not valid as the AO failed to establish that the income escaped assessment due to the assessee's failure to disclose material facts. The initiation of reassessment proceedings beyond the statutory limitation period and without valid reasons rendered the notice issued under section 148 and the subsequent assessment order invalid. Consequently, the Tribunal dismissed the department's appeal, affirming the decision of the ld. CIT(A) to annul the assessment order.In light of the above findings, the Tribunal did not delve into the merits of other grounds of appeal raised by the department. The appeal filed by the department was ultimately dismissed, upholding the decision to quash the reassessment proceedings and assessment order for the assessment year 2001-02.