2023 (8) TMI 1612 - AT - Income Tax

Reopening of assessment under Section 147 quashed for lack of valid satisfaction regarding escaped income disclosure

The DCIT/The ACIT Circle-1 (1) (1), Vadodara Versus IOT Anwesha Engineering and Projects Ltd.

The DCIT/The ACIT Circle-1 (1) (1), Vadodara Versus IOT Anwesha Engineering and Projects Ltd. - TMI The judgment from the Appellate Tribunal ITAT Ahmedabad addresses two appeals filed by the Revenue against orders from the Commissioner of Income Tax (Appeals) and the National Faceless Appeal Centre, concerning reassessment proceedings initiated under Section 148 of the Income Tax Act for Assessment Years 2008-09 and 2012-13. The core issues revolve around the validity of the reassessment proceedings, particularly whether they were based on a mere change of opinion and whether the conditions for reopening assessments beyond four years were met.1. Issues Presented and ConsideredThe primary legal issues considered were:Whether the reassessment proceedings initiated under Section 148 were valid, given the claim of a change of opinion by the Revenue.Whether the conditions for reopening an assessment beyond four years, as specified in the proviso to Section 147, were satisfied.Whether the reassessment proceedings were initiated based on new material facts or merely on a reappraisal of existing materials.2. Issue-Wise Detailed AnalysisValidity of Reassessment Proceedings:Legal Framework and Precedents: Section 147 of the Income Tax Act allows for reassessment if income has escaped assessment. However, the proviso requires that if the reassessment is beyond four years, it must be due to the assessee's failure to disclose fully and truly all material facts.Court's Interpretation and Reasoning: The Tribunal emphasized that reassessment proceedings cannot be initiated based on a mere change of opinion. It cited several precedents where courts have held that reopening an assessment on the same set of facts, without new material, constitutes a change of opinion and is invalid.Key Evidence and Findings: The Tribunal found that the Assessing Officer (AO) had relied on the same materials available during the original assessment and had not brought any new facts to light.Application of Law to Facts: The Tribunal applied the legal principles to the facts, noting that the AO had not demonstrated any failure by the assessee to disclose material facts fully and truly. The reasons recorded for reopening did not allege any such failure.Treatment of Competing Arguments: The Tribunal considered the Revenue's argument that the reassessment was justified but found it lacking due to the absence of new material facts and the failure to meet the conditions of the proviso to Section 147.Conclusions: The Tribunal concluded that the reassessment proceedings were invalid due to the absence of new material facts and the initiation based on a change of opinion.Reopening Beyond Four Years:Legal Framework and Precedents: The proviso to Section 147 requires that for reassessment beyond four years, the escapement of income must be due to the assessee's failure to disclose fully and truly all material facts.Court's Interpretation and Reasoning: The Tribunal noted that the AO's reasons for reopening did not mention any such failure by the assessee. The Tribunal referenced several judicial decisions supporting the requirement of a clear failure to disclose for reopening beyond four years.Key Evidence and Findings: The Tribunal found no evidence of any failure by the assessee to disclose material facts fully and truly in the original assessment.Application of Law to Facts: The Tribunal applied the legal standard, finding that the absence of any allegation of failure to disclose in the recorded reasons rendered the reopening invalid.Treatment of Competing Arguments: The Tribunal found the Revenue's arguments insufficient to justify the reopening, given the lack of new material and the absence of any failure to disclose by the assessee.Conclusions: The Tribunal concluded that the reassessment proceedings were invalid as they did not meet the statutory requirements for reopening beyond four years.3. Significant HoldingsVerbatim Quotes of Crucial Legal Reasoning: The Tribunal stated, 'The AO considered the material facts which were available at the time of original assessment for the purpose of reopening and the reasons recorded do not exhibit the fact of failure of the appellant in submitting material facts for the assessment truly and fully at the time of original assessment.'Core Principles Established: The Tribunal reinforced the principle that reassessment based on a change of opinion is invalid and that reopening beyond four years requires a clear failure to disclose material facts by the assessee.Final Determinations on Each Issue: The Tribunal determined that the reassessment proceedings were invalid due to both the change of opinion and the failure to meet the conditions for reopening beyond four years.The Tribunal dismissed both appeals filed by the Revenue, affirming the decisions of the lower authorities that the reassessment proceedings were invalid.