2022 (6) TMI 447 - AT - Income Tax

ITAT Chennai: Reassessment Order Set Aside, Non-disclosure Not Established

The Appellate Tribunal ITAT Chennai ruled in favor of the assessee, setting aside the reassessment order under section 147 of the Income Tax Act, 1961. ... Reopening of assessment u/s 147 - Deduction u/s 54EC and 54F - HELD THAT:- As notice under section 148 of the Act was issued on 30.03.2016 for the assessment year 2009-10. Since action u/s 147 of the Act was initiated after four years from the end of the relevant assessment year 2009-10, which expired on 31.03.2014, both the conditions provided in section 147 should have been satisfied for the reopening proceedings to be valid. However, even assuming that the AO had reason to believe that income had escaped assessment, the second condition was not satisfied in the instant case as the assessee had disclosed fully and truly all necessary material facts in the course of original assessment proceedings and the AO has identically verified the same in para 7 and 8 of the assessment order under section 143(3) dated 08.12.2011. AO has not established that the assessee has not made a full and true disclosure of all material facts. Since the reasons recorded in the present case did not meet the conditions stipulated u/s 147 the reassessment proceedings could not be sustained in view of the judgement in the case of CIT v. Schwing Stetter India P. Ltd. [2015 (6) TMI 497 - MADRAS HIGH COURT]. Under the above facts and circumstances and respectfully following the judgement of Hon’ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT] and in the case of CIT v. Schwing Stetter India P. Ltd. [2015 (6) TMI 497 - MADRAS HIGH COURT] we set aside the order of the ld. CIT(A) on this issue and quash the reassessment order passed under section 143(3) r.w.s. 147 of the Act. The ld. DR could not file any counter statement against the cross objection filed by the assessee. Appeal of assessee allowed. Issues:1. Reopening of assessment under section 147 of the Income Tax Act, 1961.2. Challenge to the reopening of assessment by the assessee.3. Appeal against allowance of exemption under sections 54EC and 54F of the Act.Reopening of Assessment under Section 147:The appeal before the Appellate Tribunal ITAT Chennai involved the reopening of assessment under section 147 of the Income Tax Act, 1961 for the assessment year 2009-10. The Assessing Officer issued a notice under section 148 for reopening the assessment, contending that the assessee was not entitled to deductions under sections 54EC and 54F of the Act as the entire consideration was deemed as short-term capital gains. The Tribunal analyzed the reasons for reopening and found that the Assessing Officer did not establish that the assessee had failed to disclose all material facts necessary for assessment. Additionally, it was noted that the conditions for reopening under section 147 were not met, as the assessee had fully disclosed all relevant information during the original assessment proceedings. Citing legal precedents, including the judgment of the Hon'ble Supreme Court in CIT v. Kelvinator of India Ltd., the Tribunal held that the reassessment proceedings were not valid and quashed the reassessment order.Challenge to Reopening of Assessment by the Assessee:The assessee challenged the reopening of assessment before the ld. CIT(A), contending that there was no failure on their part to disclose all material facts necessary for assessment. The assessee argued that the reopening of assessment to disallow exemptions under sections 54EC and 54F of the Act amounted to a review of the original assessment order, which was impermissible. By referring to relevant case law, including judgments of the Hon'ble Jurisdictional High Court, the assessee sought to quash the reassessment order. The Tribunal considered these arguments and ultimately set aside the order of the ld. CIT(A) on this issue, quashing the reassessment order passed under section 143(3) read with section 147 of the Act.Appeal Against Allowance of Exemption under Sections 54EC and 54F:The Revenue filed an appeal against the allowance of exemption under sections 54EC and 54F of the Act. However, since the Tribunal had quashed the assessment order and decided the issue against the Revenue regarding the reopening of assessment, the appeal on the merits was deemed academic, and no further adjudication was required. Consequently, the appeal filed by the Revenue was dismissed, and the Cross Objection filed by the assessee challenging the reopening of assessment was allowed.In conclusion, the Appellate Tribunal ITAT Chennai ruled in favor of the assessee, setting aside the reassessment order due to the failure to meet the conditions for reopening under section 147 of the Income Tax Act, 1961. The Tribunal emphasized the importance of full disclosure of material facts by the assessee and the impermissibility of reopening assessments based on a mere change of opinion. The judgment highlighted the significance of legal precedents in determining the validity of reassessment proceedings and upheld the assessee's contentions while dismissing the Revenue's appeal on the merits.