Reassessment Order Quashed: Invalid Reopening Due to Time Limits and Lack of Evidence for Income Escaping Assessment.

The ITAT quashed the reassessment order for A.Y. 2013-14, deeming the reopening under Section 147 invalid due to non-compliance with statutory time limits and lack of evidence of income escaping assessment. The appeal was allowed as the reopening was based on outdated information and no failure to disclose material facts by the assessee was found.

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Issues:
Reopening of assessment u/s. 147 for A.Y. 2013-14 based on non-filer entities and unexplained purchases.

Analysis:
The appeal was filed against an order passed by NFAC, Delhi for the quantum of assessment u/s. 147 for the A.Y. 2013-14. The assessee did not appear, and the appeal was decided based on the material on record and orders of the authorities below. The ld. CIT(A) dismissed the appeal due to non-compliance with notices from NFAC module, leading to the appeal's dismissal for want of prosecution.

The assessee, a builder and developer of affordable houses, had declared total income of Rs. 3,59,09,800. The assessment was completed u/s. 143(3) earlier, accepting trading results and purchases. The case was reopened u/s. 148 for A.Y. 2013-14 due to payments of Rs. 2,66,23,428 to non-filer entities based on fake bills. The AO added the entire purchases amount without discussing the assessee's objections.

Upon review, it was found that the case was reopened based on information from the ITBA database about non-filer entities, despite the purchases being part of the previously examined trading amount. The reopening was done almost nine years after the relevant assessment year without evidence of income chargeable to tax. The reassessment was challenged citing the time limit provisions under Section 149 and the first proviso to Section 147, which were not met. As no failure on the part of the assessee to disclose material facts existed, the reopening was deemed bad in law and quashed, resulting in the allowance of the assessee's appeal.

In conclusion, the assessment order was quashed due to the improper reopening of the case beyond the statutory time limits and lack of evidence of income chargeable to tax escaping assessment. The appeal of the assessee was allowed, and the order was pronounced on 3rd July 2024.

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