2014 (4) TMI 274 - AT - Income Tax

Invalid Reopening of Assessment Beyond Limitation Period

The ITAT DELHI allowed the appeal, ruling that the reopening of assessment beyond the four-year limitation period under Section 147 was invalid. The ... Validity of order u/s 143(3) r.w. section 147 of the Act – Jurisdiction – Bar of limitation – No failure on the part of the assessee to disclose the material facts – Held that:- The AO has referred to the completion of original assessment u/s 143(3) and has pointed out that the tax had been levied at a rate of 10% while it should have been levied at the rate of 20% on some income and 40% on some income - in the reasons recorded, there is no mention by the AO of any failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment - the decision in HARYANA ACRYLIC MANUFACTURING COMPANY Versus COMMISSIONER OF INCOME-TAX IV and ANOTHER [2008 (11) TMI 2 - DELHI HIGH COURT] followed – the reopening of assessment beyond four years was barred by limitation in view of the proviso to Section 147 – thus, notice issued u/s 148 is quashed and the assessment order is also set aside – Decided in favour of Assessee. Issues involved:1. Jurisdiction of reopening assessment under Section 147 beyond the limitation period of four years from the end of the relevant assessment year.Comprehensive analysis:The appeal before the Appellate Tribunal ITAT DELHI was directed against the directions of the Dispute Resolution Panel-I for the AY 2004-05. The main issue revolved around the reopening of assessment under Section 147 beyond the four-year limitation period. The original assessment was completed under Section 143(3) on a specific date, and the reopening notice was issued after the lapse of four years from the end of the relevant assessment year. The proviso to Section 147 was crucial in determining the validity of the reopening. The appellant contended that there was no failure on their part to disclose all material facts necessary for assessment, as required by the proviso. The appellant relied on a decision by the Hon'ble Jurisdictional High Court to support their argument.The arguments presented by both parties focused on the interpretation of Explanation (2) of Section 147 and the proviso to Section 147. The appellant emphasized that the reasons recorded for reopening did not indicate any failure on their part to disclose fully and truly all material facts necessary for assessment. The appellant highlighted the specific language used in the reasons for reopening, which did not mention any such failure. This lack of disclosure failure was crucial in determining the validity of the reopening beyond the limitation period. The appellant's counsel also referenced a previous decision by the Hon'ble Jurisdictional High Court to strengthen their case.The Tribunal carefully considered the submissions and analyzed the facts of the case in light of the relevant legal provisions and precedents. The Tribunal found that the reasons recorded for reopening assessment did not establish any failure on the part of the appellant to disclose material facts necessary for assessment. This finding aligned with the decision of the Hon'ble Jurisdictional High Court in a similar case. As a result, the Tribunal held that the reopening of assessment beyond the four-year limitation period was barred by limitation under the proviso to Section 147. Consequently, the notice issued under Section 148 was quashed, along with the assessment order framed based on that notice.In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the importance of adhering to the statutory limitations and requirements for reopening assessments under Section 147. The decision was pronounced in open court on a specific date, marking the resolution of the jurisdictional issue in favor of the appellant.