2014 (2) TMI 302 - AT - Income Tax

Tribunal Upholds CIT(A)'s Decision on Reassessment Proceedings

The Tribunal upheld the CIT(A)'s decision to quash reassessment proceedings under section 147 of the Income-tax Act, 1961. The appeal by the revenue ... Reassessment proceedings u/s 147 of the Act quashed – Held that:- The assessment is beyond four years and there is no whisper in the reasons recorded for issuing notice u/s. 148 of the Act or in the reassessment order framed u/s. 147/148/143(3) of the Act dated 04.11.2011 that there is failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment - the conditions of first proviso to section 147 of the Act are not fulfilled - subsequent to passing of the regular assessment in November 2006 no new material or information came in AO's possession consequent to which he could form his reason to believe that income chargeable to tax escaped assessment - neither in the recorded reasons nor even in the assessment order, the AO has even alleged that escapement of income was consequent upon appellant's failure to disclose truly and fully all material facts necessary for assessment – the conditions of the first proviso to sec. 147 were not fulfilled - There was no infirmity in the order of CIT(A) – thus, the order of the CIT(A) quashing the reassessment framed by AO u/s. 147 r.w.s. 148/143(3) of the Act upheld – Decided against Revenue. Issues:Appeal against quashing of reassessment proceedings under section 147 of the Income-tax Act, 1961.Analysis:The appeal by the revenue and cross objection by the assessee arose from the order of the CIT(A), Central-II, Kolkata regarding the assessment for Assessment Year 2004-05. The revenue's appeal challenged the CIT(A)'s decision to quash the reassessment proceedings under section 147 of the Act. The revenue raised three grounds questioning the legality of the CIT(A)'s decision. The primary contention was that the CIT(A) erred in holding the initiation of reassessment proceedings as bad in law, as well as in concluding that the conditions specified in the first proviso of section 147 were not met, despite alleged non-disclosure of material facts by the assessee leading to underassessment.The facts revealed that the assessee, engaged in managing a business center, filed its return for AY 2004-05, which was initially assessed under section 143(3) as income from business and profession. Subsequently, the AO initiated reassessment under section 147, contending that the income should have been taxed as 'Income from House Property.' The assessee argued before the CIT(A) that the reassessment was beyond the permissible time limit of four years and that there was no failure on its part to disclose all material facts. The reassessment was also challenged on the grounds of being based on a change of opinion rather than new material.The CIT(A) noted that the AO, during the original assessment, had considered the nature of the business and assessed the income under the correct head. No new material emerged post the original assessment that could justify reopening under section 147. The CIT(A) highlighted that the conditions of the first proviso to section 147 were not fulfilled in this case, as there was no failure on the part of the assessee to disclose all material facts necessary for assessment. Consequently, the CIT(A) upheld the quashing of the reassessment proceedings.The Tribunal concurred with the CIT(A)'s findings, emphasizing that the reassessment was not warranted as the assessee had provided all relevant details during the original assessment. The Tribunal dismissed the revenue's appeal, confirming the CIT(A)'s decision to quash the reassessment. As the revenue's appeal was dismissed, there was no need to delve into the merits of the case. The Cross Objection by the assessee was also dismissed as it was not argued. Ultimately, both the appeal of the revenue and the Cross Objection of the assessee were dismissed, upholding the CIT(A)'s order.In conclusion, the Tribunal upheld the CIT(A)'s decision to quash the reassessment proceedings under section 147, emphasizing the absence of any failure on the part of the assessee to disclose material facts and the lack of new grounds for reassessment beyond the prescribed time limit. The judgment serves as a reminder of the importance of adhering to the statutory requirements and justifying reassessment based on valid reasons in accordance with the provisions of the Income-tax Act, 1961.