Tax officer cannot reopen assessment after four years when cash deposits were already disclosed in original return

The ITAT Amritsar quashed a reopening assessment under section 147 issued after four years. The appellant had disclosed disputed cash deposits in bank statements and balance sheets filed with the original return, which were considered by the AO in the section 143(3) assessment. The tribunal held that since there was no failure to disclose material facts truly and fully, the reopening was barred by the first proviso to section 147. The AO merely acted on information already on record from the original assessment, constituting a change of opinion rather than valid grounds for reopening. The assessment order was declared bad in law and quashed.

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Issues:
Validity of notice issued u/s 148 and assessment order passed u/s 147r.w.s. 143(3) challenged as bad in law.

Analysis:
The appellant filed appeals against the order of the National Faceless Appeal Centre challenging the validity of notice issued u/s 148 and assessment order passed u/s 147r.w.s. 143(3) for the Assessment Year 2008-09. The appellant's return was filed u/s 44AF at an income of Rs 1,05,670 by applying 5% profit on the total turnover. The assessment was completed at an income of Rs. 39,66,365, which was later deleted by Ld. CIT (A) as time-barred. The assessment was reopened based on cash deposits in the appellant's saving bank account, leading to an addition of Rs. 38,60,965 as unexplained cash credits.

The appellant argued that the notice issued u/s 148 was invalid as the saving bank account was disclosed in the balance sheet and P&L account during scrutiny assessment u/s 143(3). The appellant contended that the Assessing Officer acted on information already considered during the original assessment, making the notice invalid under the 1st proviso to section 147. The appellant cited relevant case laws to support the argument that reopening beyond four years without failure to disclose material facts is bad in law.

The Tribunal noted that the notice u/s 148 was issued after four years from the relevant assessment year, where the appellant had disclosed the disputed cash deposits in the balance sheet and profit and loss account filed with the return of income. The Tribunal held that there was no failure on the part of the appellant to disclose material facts necessary for assessment, rendering the assessment order passed u/s 147 as bad in law.

Referring to case laws, the Tribunal emphasized that reopening assessments beyond four years without any failure to disclose material facts is unjustified. The Tribunal concluded that the AO acted solely on information already on record, making the reopening notice illegal. Consequently, the assessment order was quashed, rendering the penalty under section 271(1)(c) infructuous.

In conclusion, both appeals filed by the appellant were allowed, and the assessment order was quashed as being bad in law, leading to the penalty becoming infructuous.

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