2014 (4) TMI 203 - AT - Income Tax

Tribunal dismisses revenue's appeal on reassessment, emphasizes disclosure requirement. Rs. 2,87,27,105 addition deleted.

DCIT, Central Circle 6, New Delhi Versus M/s. RC. Sood & Co. P. Ltd.

The Tribunal upheld the CIT(A)'s decision, dismissing the revenue's appeal challenging the initiation of reassessment proceedings under section 147 of the ... Reassessment u/s 147 – CIT(A) has set aside the reassessment on the ground that there has been o failure on the part of the assessee to disclose the necessary details. - Reassessment framed after period of more than four years from end of assessment year - Held that:- Where assessee has been made a full and true disclosure of facts the case cannot be reopened after the period of four years – In case Inducto Ispat Alloys Ltd. Vs ACIT (OSD) [2009 (3) TMI 512 - GUJARAT HIGH COURT] and CIT Vs Goetze (India) Ltd. [2010 (1) TMI 29 - DELHI HIGH COURT ] ground is decided in favour of assessee. No mention about assessee's having failed to disclose fully and truly all material facts necessary for the assessment for the assessment year under consideration, as provided in first proviso to Section 147 - Reopening of assessment in view of facts and circumstances of case is not justified - Ld. CIT(A)'s action in deciding the issue in favour of the assessee is proper and legally correct - Decided against Revenue. Issues:1. Reassessment proceedings initiated under section 147 of the Income Tax Act, 1961.2. Addition of Rs. 2,87,27,105 on account of 'Provision for Unfinished Work' deleted by the CIT(A).Issue 1: Reassessment Proceedings:The appeal by the revenue challenged the CIT(A)'s decision regarding the initiation of reassessment proceedings under section 147 of the Income Tax Act, 1961. The CIT(A) had held that the action of the Assessing Officer (A.O.) in initiating the reassessment proceedings was unjust, arbitrary, and unlawful. The A.O. had raised the reassessment proceedings based on a provision for unfinished work made by the assessee on an estimated basis. The CIT(A) considered the assessee's submissions and concluded that the reassessment was framed after a period exceeding four years from the end of the relevant assessment year, and there was no failure on the part of the assessee to disclose necessary details. Citing various judicial precedents, the CIT(A) decided the issue in favor of the assessee, emphasizing that when the assessee made a full and true disclosure of facts, the case could not be reopened after the four-year period. The Tribunal concurred with the CIT(A)'s findings, upholding that the reopening of the assessment was not justified, and dismissed the revenue's appeal on this issue.Issue 2: Addition of Provision for Unfinished Work:The second issue involved the deletion of an addition of Rs. 2,87,27,105 made by the A.O. on account of 'Provision for Unfinished Work.' The CIT(A) had decided in favor of the assessee, stating that the assessee had disclosed the details of the provision made. The revenue contended that the reassessment proceedings were justified as there was under-assessment related to the provision for unfinished work. However, the Tribunal, having upheld the CIT(A)'s decision on the initiation of reassessment proceedings, did not delve into this issue, as it was contingent on the first issue. Consequently, the Tribunal dismissed the revenue's appeal in its entirety.In conclusion, the Tribunal upheld the CIT(A)'s decision on the initiation of reassessment proceedings and dismissed the revenue's appeal. The judgment emphasized the importance of full and true disclosure by the assessee and highlighted the legal requirements for justifying the reopening of assessments under the Income Tax Act, 1961.