2021 (8) TMI 456 - AT - Income Tax

Tribunal invalidates assessment reopening for 2011-2012 under Income Tax Act

Shriram EPC Limited Versus The Assistant Commissioner of Income Tax, Company Circle – 6 (1), Chennai

The Tribunal invalidated the reopening of the assessment under Section 148 of the Income Tax Act, 1961, for the Assessment Year 2011-2012. The original ... Reopening of assessment u/s 147 - HELD THAT:- There should be a failure on the part of the Assessee to disclose fully and truly all the material facts necessary for that assessment for that particular assessment year. In this case, the reasons recorded clearly indicates that, there is no such finding recorded by the Assessing Officer for the reopening of the assessment. Considering the proviso to Section 147 of the Act and also by following in the case of Commissioner of Income Tax and Another Vs. Foramer France [2000 (8) TMI 45 - ALLAHABAD HIGH COURT] and in the case of Fenner (India) Limited Vs. Deputy Commissioner of Income Tax [1998 (11) TMI 66 - MADRAS HIGH COURT], we hold that the reopening is not valid. - Decided in favour of assessee. Issues Involved:1. Validity of reopening the assessment under Section 148 of the Income Tax Act, 1961.2. Compliance with the Proviso to Section 147 of the Income Tax Act, 1961.3. Impact of Audit Objections on the reopening of assessment.4. Applicability of CBDT Circular No.8/2016.Issue-wise Detailed Analysis:1. Validity of Reopening the Assessment under Section 148:The Assessee filed a return for the Assessment Year 2011-2012, which was processed under Section 143(1) and later scrutinized under Section 143(3). A notice under Section 148 was issued on 29.03.2018 for the same assessment year on the grounds of income escapement. The Assessee objected, arguing that the original assessment was completed after considering all details, and reopening was not justified. The Tribunal noted that the original assessment was completed after examining all details, and the reopening notice was beyond the four-year limit. Thus, the reopening was deemed invalid.2. Compliance with the Proviso to Section 147:The Tribunal examined the Proviso to Section 147, which restricts reopening beyond four years unless there is a failure on the Assessee's part to disclose fully and truly all material facts. The Tribunal found no such failure in the recorded reasons for reopening. The Tribunal cited the Supreme Court's decision in Commissioner of Income Tax and Another Vs. Foramer France, which held that reopening beyond four years without such a finding is invalid. Similarly, the Jurisdictional High Court's decision in Fenner (India) Limited Vs. Deputy Commissioner of Income Tax supported this view. Therefore, the Tribunal concluded that the reopening was not compliant with the Proviso to Section 147.3. Impact of Audit Objections on the Reopening of Assessment:The Assessee argued that the reopening was based on an audit objection. The Tribunal noted that the Assistant Commissioner of Income Tax had initially responded to the audit objection, stating there was no income escapement, and the Principal Commissioner of Income Tax had requested the audit party to drop the objection. The Tribunal referred to the CBDT Circular No.9/2006 and the Jurisdictional High Court's decision in Principal Commissioner of Income Tax, Chennai Vs. M/s. SKI Retail Capital Limited, Chennai, which held that no remedial action is needed if the Principal Commissioner does not accept the audit objection. Thus, the Tribunal found that the reopening based on audit objections was invalid.4. Applicability of CBDT Circular No.8/2016:The Tribunal considered CBDT Circular No.8/2016, which states that no remedial action is needed if the Principal Commissioner does not accept the audit objection. The Tribunal noted that both the Assessing Officer and the Principal Commissioner had communicated to the audit party that there was no income escapement. Therefore, issuing a notice under Section 148 was contrary to the Circular. The Tribunal concluded that the reopening was not valid as per the CBDT Circular and the Jurisdictional High Court's decision.Conclusion:The Tribunal quashed the notice issued under Section 148 dated 29.03.2018, declaring the reopening of the assessment invalid. Consequently, the merits of the case were deemed immaterial. The appeal of the Assessee was allowed.