2018 (12) TMI 189 - AT - Income Tax

Tribunal quashes tax reopening beyond 4 years, emphasizes lack of disclosure. Assessing Officer's actions questioned.

The Tribunal held that the assumption of jurisdiction under Section 147 of the Income Tax Act was not justified as the necessary condition for reopening ... Reopening of assessment - reasons of reopening of assessment - Held that:- While following the decision in the case of Wel Intertrade P. Ltd vs ITO [2008 (8) TMI 18 - HIGH COURT DELHI] and Duli Chand Singhania Vs. ACIT [2003 (12) TMI 23 - PUNJAB AND HARYANA HIGH COURT] for the principle that in the absence of an allegations that escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all the material facts necessary for his assessment, which is a “sine qua non” for assuming jurisdiction u/s 147 in a case falling under the proviso thereto, any action taken by the AO is wholly without jurisdiction. In the instant case, it is not the case of the revenue that any material could be secured in the search conducted at the premises of the assessee to suggest that the assessee failed to disclose fully and truly all material facts necessary for the assessment, as such, reopening u/s 147 of the Act is justified. We hold that the reopening proceedings cannot survive and that are liable to be quashed and are accordingly quashed. - Decided in favour of assessee. Issues Involved:1. Assumption of jurisdiction under Section 147 of the Income Tax Act.2. Validity of reopening proceedings under Section 148 of the Income Tax Act.3. Merits of the addition of Rs. 3,01,69,142/- for unverified purchases.Detailed Analysis:1. Assumption of Jurisdiction under Section 147 of the Income Tax Act:The primary contention of the assessee was that the mandatory requirements of Section 148 and the preconditions for invoking Section 147 were not satisfied. The assessee argued that there was no failure on their part to disclose fully and truly all material facts necessary for the assessment. The Tribunal observed that the original assessment was completed on 15.10.2008, and the search took place on 28.08.2013, which is beyond the six-year period for block assessment. The Tribunal noted that for reopening under Section 147 after four years, there must be a failure to disclose fully and truly all material facts, which was not alleged by the AO. The Tribunal concluded that the assumption of jurisdiction by the AO was not justified as the necessary condition for reopening beyond four years was not met.2. Validity of Reopening Proceedings under Section 148 of the Income Tax Act:The Tribunal emphasized that the reasons recorded for reopening must indicate that income escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The Tribunal found that the reasons provided by the AO did not allege any such failure by the assessee. Citing the Delhi High Court's decision in Haryana Acrylic Manufacturing Co. vs. CIT, the Tribunal reiterated that in the absence of such an allegation, the reopening beyond four years is without jurisdiction. The Tribunal quashed the reopening proceedings, holding that the statutory requirement under the proviso to Section 147 was not satisfied.3. Merits of the Addition of Rs. 3,01,69,142/- for Unverified Purchases:On the merits, the Tribunal noted that the AO made the addition based on the failure to produce invoices/khakis, which were allegedly with the Directorate General of Central Excise Intelligence. The Tribunal observed that the AO issued the notice under Section 148 and subsequently under Section 143(2) hoping to secure some material through rowing enquiries. However, the Tribunal found that all relevant purchases and sales details were already available during the original assessment under Section 143(3). The Tribunal held that the addition was made without securing any new material against the assessee and without proving any failure to disclose material facts.Conclusion:The Tribunal concluded that the reopening proceedings were not justified as the necessary condition of failure to disclose fully and truly all material facts was not met. Consequently, the Tribunal quashed the reopening proceedings and allowed the appeal of the assessee. The order was pronounced in the open court on 31/10/2018.