2014 (11) TMI 642 - AT - Income Tax

Invalid re-opening of assessment under section 147 for 2004-05; assessment quashed, assessee's cross objection allowed

Dy. Commissioner of Income Tax–2(1) Versus Binani Metals Limited

The Tribunal held that the re-opening of the assessment under section 147 for the assessment year 2004-05 was invalid as all necessary information was ... Reopening of assessment u/s 147 – Full and true disclosure made by assessee - Once the information was already there in the record, then receiving of information on the same point cannot be held to be new information or any tangible material coming into record – Held that:- The assessee had filed copy of sale agreement to the AO – the sale agreement clearly provides details of sale consideration of the flat which was at ₹ 1.17 crores and apart from that there was a working done by the stamp valuation authorities at the last page whereby they have valued the flat for the purpose of stamp duty at ₹ 1,44,55,400 - All these information were there before the Assessing Officer - The AO has duly taken note of the sale agreement in the assessment order - assessee has fully and truly disclosed all the material facts necessary for its assessment - for acquiring the jurisdiction u/s 147, the AO has taken note of some information received from the Income Tax Officer that the market value of flat is higher than the sale consideration and, thereafter, he has ascribed failure on the part of the assessee - the information about the market value of the property was at ₹ 1,44,55,000, was already there in the record during the course of the assessment proceedings - Once the information was already there in the record, then receiving of information on the same point cannot be held to be new information or any tangible material coming into record. Merely mentioning that the assessee has failed to disclose fully and truly all material facts is not sufficient to acquire jurisdiction within the ambit of proviso to section 147, but the Assessing Officer has to ascribe specifically, what is the failure on the part of the assessee. Once the entire facts has been disclosed during the course of assessment proceedings, then it cannot be held that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment - The assessee is only required to disclose the entire facts and material and then it is upon the Assessing Officer to draw the legal inference for the purpose of assessment - in case where the assessment has been completed u/s 143(3), then no action can be taken for re–opening the case u/s 147, after the expiry of four years from the end of the relevant assessment year, unless twin conditions are fulfilled - there is no failure on the part of the assessee - Thus, under first proviso to section 147, the re–opening of the assessment u/s 147 is bad in law and the entire proceedings initiated vide notice issued u/s 148 is void–ab–initio being without jurisdiction – thus, the reopening of assessment is set aside – Decided against revenue. Issues:Validity of re-opening under section 147 for assessment year 2004-05.Analysis:The appeal was filed by the Revenue and the cross objection by the assessee challenging the order passed by the Commissioner (Appeals) for the assessment year 2004-08 under section 143(3) r/w section 147 of the Income Tax Act, 1961. The assessee objected to the re-opening of the assessment under section 147, arguing that all details were disclosed during the original assessment proceedings and the re-opening was beyond the four-year period, amounting to a 'change of opinion.' The Assessing Officer, however, referred the matter to the Department Valuation Officer (DVO) for valuation, but the DVO's report was not available before the assessment order was passed. The Commissioner (Appeals) rejected the re-opening objection but provided relief on merits based on the DVO's report received during the first appellate proceedings, concluding that the sale consideration was at fair market value.The assessee contended that all relevant details were provided during the original assessment, including the sale agreement and stamp valuation details, and the Assessing Officer had considered these in the assessment order. The Departmental Representative argued that the fair market value determined by the stamp valuation authority might have been overlooked by the Assessing Officer, justifying the re-opening under the Explanation to section 147. The Tribunal noted that all necessary information was disclosed during the original assessment, and the re-opening was based on information already present in the record, not constituting new material. It was held that there was no failure on the part of the assessee to disclose material facts, rendering the re-opening beyond the four-year period invalid under the proviso to section 147. Consequently, the assessment order was quashed, and the cross objection by the assessee was allowed.Since the assessment was quashed, the Tribunal did not adjudicate on the Department's grounds on merits, deeming them academic and dismissed them as infructuous. Therefore, the cross objection by the assessee was allowed, and the Revenue's appeal was dismissed.