2018 (12) TMI 743 - AT - Income Tax

Appellate Tribunal dismisses Revenue's appeal on reopening assessment; emphasizes full disclosure requirement

The Appellate Tribunal dismissed the Revenue's appeal concerning the reopening and reassessment for the assessment year 2006-07 under sections 147, 251, ... Reopening of assessment - wrong windmill depreciation claim - assessee had wrongly included land cost in its windmill depreciation claim - Held that:- No failure on the taxpayer’s part to disclose “fully and truly” all necessary facts in its return of income. Learned Departmental Representative’s case is that the assessee had wrongly included land cost in its windmill depreciation claim and therefore, its disclosure made in assessment proceedings does not satisfy the latter lines of truly ‘ in section 147 1st proviso’ in the Act. There is no dispute first of all that the Assessing Officer’s reopening reasons did not specifically indicate the assessee’s failure in not having disclosed all the relevant facts “fully and truly” at the first instance. Omission on part of an Assessing Officer is fatal to validity of the reopening in issue. We further find as per assessee’s particulars of depreciation allowable in respect of block of assets in the relevant previous year that it had nowhere included land cost of ₹ 20,000,000/- for the purpose of the relief in issue. This clinching fact has gone unrebutted at the Revenue’s behest during the course of hearing. We therefore affirm the CIT(A)’s findings holding the impugned reopening to be not sustainable in the eyes of law. The Revenue fails in its sole legal ground. - Decided in favour of assessee. Issues:- Validity of reopening/reassessment under sections 147, 251, and 143(3) of the Income Tax Act, 1961 for assessment year 2006-07.Analysis:1. Validity of Reopening/Reassessment:The appeal before the Appellate Tribunal ITAT Kolkata concerned the validity of reopening/reassessment for the assessment year 2006-07 under sections 147, 251, and 143(3) of the Income Tax Act, 1961. The CIT(A) had annulled the impugned assessment, citing that there was no failure on the taxpayer's part to disclose all necessary facts fully and truly in its income tax return. The Revenue contended that the disclosure made by the taxpayer did not satisfy the requirement of disclosing all relevant facts 'fully and truly,' specifically regarding the inclusion of land cost in the windmill depreciation claim. However, the Assessing Officer's reopening reasons did not explicitly mention the failure of the taxpayer to disclose all relevant facts. Citing a decision of the Hon'ble Bombay High Court, it was held that such omission by the Assessing Officer rendered the reopening invalid. Additionally, it was noted that the taxpayer had not included land cost for the depreciation claim, a fact that was undisputed during the proceedings. Consequently, the Appellate Tribunal affirmed the CIT(A)'s findings that the reopening was not sustainable in the eyes of the law, leading to the Revenue's failure in its legal ground.2. Judicial Precedence and Legal Analysis:The Appellate Tribunal extensively discussed the legal aspects involved in the case, emphasizing the necessity of the Assessing Officer to record reasons for reopening an assessment, particularly regarding the failure to disclose all material facts by the taxpayer. Citing the Hon'ble Bombay High Court's ruling, it was established that the absence of such a finding by the Assessing Officer rendered the reopening invalid. The Tribunal further analyzed the provisions of section 147 of the Income Tax Act, emphasizing the importance of full and true disclosure by the taxpayer to warrant a reopening of the assessment. Based on the facts and legal principles presented, the Tribunal concluded that the action of the Assessing Officer in reopening the case based on extraneous factors was antithetical to the provisions of the Act and, therefore, the impugned assessment was considered invalid and time-barred.3. Outcome and Dismissal of Appeal:Ultimately, the Appellate Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to annul the impugned assessment. The Tribunal pronounced the order on 12.10.2018, highlighting the importance of complying with legal requirements for reopening assessments and ensuring the full and true disclosure of material facts by taxpayers to maintain the validity of such proceedings.This detailed analysis of the judgment showcases the thorough consideration of legal provisions, judicial precedents, and factual circumstances that led to the dismissal of the Revenue's appeal regarding the reopening and reassessment for the assessment year 2006-07.