2023 (12) TMI 926 - AT - Income Tax

Assessment reopening beyond four years quashed due to revenue's failure to establish non-disclosure of material facts under section 143(3)

The Deputy Commissioner of Income Tax, Central Circle-3 (1), Chennai Versus Santha Build Tech India Pvt. Ltd.

ITAT Chennai quashed the reopening of assessment beyond four years. The AO failed to record any non-disclosure of material facts by the assessee despite ... Validity of reopening of assessment - Reason to believe - reopening beyond four years - assessee has not deducted TDS on interest payment - HELD THAT:- We noted that as the AO has not recorded in its reasons for reopening of assessment that there is any failure on the part of the assessee to disclose any material fact necessary for completion of assessment in the relevant assessment year, despite the fact that original assessment was completed u/s. 143(3) of the Act and time period of 4 years has expired from the end of the assessment year before reopening of assessment u/s. 147 r.w.s. 148 of the Act, we find no infirmity in the order of CIT(A) quashing the reopening. we are of the view that reopening is beyond 4 years and as the original assessment was framed u/s. 143(3) of the Act, the Revenue could not establish any failure on the part of the assessee to disclose any material facts necessary for its assessment, the reopening in present case is bad in law. Decided against revenue. Issues involved:The only issue in this appeal is the validity of the reopening of assessment by the CIT(A) quashing the reassessment proceedings.Reopening of Assessment:The Revenue appealed against the CIT(A)'s decision to quash the reopening of assessment under section 147 of the Income Tax Act. The CIT(A) held that the assessment was reopened after the expiry of four years and there was no failure on the part of the assessee to disclose any material fact necessary for the assessment. The CIT(A) observed that the AO did not establish any failure on the part of the assessee to disclose material facts, and no new material was presented to justify the reopening. The CIT(A) cited the proviso to section 147, stating that an assessment completed under section 143(3) cannot be reopened after four years unless there is a failure to disclose material facts. The CIT(A) concluded that the reassessment was not valid and canceled it.Assessee's Case:The assessee, engaged in the construction business, filed its return for the assessment year 2013-14, which was selected for scrutiny assessment. The assessment was completed under section 143(3) of the Act. Subsequently, the assessment was reopened under section 147 based on the non-deduction of TDS on interest payments made by the assessee. The CIT(A) quashed the reopening, noting that the original assessment was completed beyond four years and there was no failure on the part of the assessee to disclose material facts necessary for the assessment. The CIT(A) emphasized that the AO did not present any new material to justify the reopening.Legal Precedent:The Tribunal considered the decision of the Hon'ble Supreme Court in the case of CIT vs. Foramer France, which highlighted the importance of the proviso to section 147. The Tribunal noted that the law requires a failure on the part of the assessee to disclose material facts for a valid reopening of assessment. As the original assessment was completed under section 143(3) and no failure to disclose material facts was established, the Tribunal upheld the CIT(A)'s decision to quash the reassessment. The Tribunal emphasized that the reopening, beyond four years, without any failure to disclose material facts, was not valid under the law.Conclusion:The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s decision to quash the reassessment. As the reopening was beyond four years and no failure to disclose material facts was established, the reassessment was deemed invalid. Therefore, the Tribunal upheld the CIT(A)'s decision, and the appeal of the Revenue was dismissed.