2014 (7) TMI 593 - AT - Income Tax

Tax Tribunal Invalidates Reassessment Notice, Emphasizes Compliance with Section 147 Proviso

The Appellate Tribunal dismissed the Departmental appeal, affirming that the notice u/s. 148 for reassessment was invalid as there was no failure on the ... Notice u/s 148 of the Act – Reason to believe - Recalculation of deduction u/s 80HHC of the Act – Held that:- Where an assessment was already completed u/s 143(3) such assessment cannot be reopened after the expiry of four years from the end of the relevant assessment year - since assessment was completed u/s 143(3) on 31.3.2006 it cannot be reopened after four years from the end of the AY i.e., the assessment cannot be reopened beyond 31.3.2008 unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee in disclosing fully and truly all material facts necessary for completion of assessment for that AY - notice u/s 148 was issued to recompute the disallowance of deduction allowed u/s 80HHC based on the information already available on record which is not permissible in law since there is no failure on the part of the assessee in disclosing fully and truly all material facts necessary for completion of assessment and, therefore, issue of notice u/s. 148 is bad in law – Relying upon CIT vs. Purolator India Ltd. [2011 (11) TMI 365 - DELHI HIGH COURT] followed - the return of income and the material placed on the record by the assessee together with the return would make it abundantly clear that the assessee had set forth the basis of its claim and there was no suppression of material facts - the fundamental condition for reopening the assessment beyond a period of four years has not been fulfilled – Decided against Revenue. Issues:Reopening of assessment u/s. 147 for A.Y. 2003-04 based on deduction u/s. 80HHC; Validity of notice u/s. 148 after completion of original assessment u/s. 143(3); Allegation of change in opinion by the Assessing Officer; Compliance with the proviso to section 147 regarding reopening of assessments; Failure to disclose fully and truly all material facts by the assessee.Analysis:1. Reopening of Assessment u/s. 147 for A.Y. 2003-04:The case involved the reopening of the assessment u/s. 147 for the assessment year 2003-04 by the Assessing Officer based on the deduction u/s. 80HHC. The original assessment was completed u/s. 143(3) of the Income-tax Act, 1961, and later reopened by the AO. The assessee contended that the notice u/s. 148 was barred by limitation and there was no failure on their part to provide necessary information. The CIT(A) held that the reopening was invalid as the deduction u/s. 80HHC was already recomputed during the original assessment proceedings.2. Validity of Notice u/s. 148 after Completion of Original Assessment:The validity of the notice u/s. 148 issued after the completion of the original assessment u/s. 143(3) was challenged. The CIT(A) found that the notice was issued beyond the permissible time limit and without any new information coming to light. The Appellate Tribunal observed that the notice was issued to recompute the deduction u/s. 80HHC based on existing information, indicating a lack of failure on the part of the assessee to disclose material facts.3. Allegation of Change in Opinion by the Assessing Officer:The Department contended that there was no change in opinion by the Assessing Officer regarding the deduction u/s. 80HHC. However, the Tribunal noted that the original assessment already addressed the deduction, and the subsequent notice u/s. 148 lacked a valid reason for reopening the assessment.4. Compliance with the Proviso to Section 147:The Tribunal emphasized the proviso to section 147, which restricts the reopening of assessments after the expiry of four years from the end of the relevant assessment year unless there is an escapement of income due to the assessee's failure to disclose material facts. In this case, since the assessment was completed u/s. 143(3) in 2006, it could not be reopened after 2008 without valid reasons.5. Failure to Disclose Fully and Truly All Material Facts:The Tribunal concluded that the notice u/s. 148 was invalid as there was no failure on the part of the assessee to disclose all material facts necessary for the assessment. Citing relevant case law, the Tribunal dismissed the Departmental appeal, upholding that the fundamental condition for reopening the assessment beyond the stipulated period had not been met.In the final judgment pronounced on 9th July 2014, the Appellate Tribunal dismissed the Departmental appeal, affirming the decision that the notice u/s. 148 for reassessment was not valid due to the absence of any failure on the part of the assessee to disclose essential information, thereby upholding the principles of law regarding the reopening of assessments.