2024 (7) TMI 1471 - AT - Income Tax

Section 148 reopening notice quashed as time-barred after four years without proving material facts concealment

ITAT Chennai quashed reopening notice issued under Section 148 beyond four-year limitation period. Original assessment was completed under Section 143(3) ... Validity of reopening of assessment - reasons to believe - notice beyond period of four years - as argued AO has failed to point out the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year - HELD THAT:- Admitted facts are that the original assessment was completed by the AO u/s. 143(3) of the Act on 30.03.2015. The assessment year involved is AY 2012-13 and notice u/s. 148 of the Act was issued on 25.03.2019 and admittedly, it is beyond 4 years. Once the notice is beyond 4 years, we have to see whether there is any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year 2012-13. It cannot be inferred or there is no iota or word about the escapement of income, how the income has escaped due to the failure on the part of the assessee to file fully and truly all material facts necessary for its assessment. Once this is a fact, this issue is fully covered by the decision of Foramer France [2003 (1) TMI 101 - SC ORDER] wherein the Hon’ble Supreme Court has affirmed the decision Foramer France [2000 (8) TMI 45 - ALLAHABAD HIGH COURT] wherein as held it is the new Section 147 which will apply to the facts of the present case. In the present case, there was admittedly no failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment. Hence, the proviso to the new Section 147 squarely applies, and the impugned notices were barred by limitation. In the absence of any failure on the part of the assessee to disclose fully and truly all material facts and assessment framed u/s. 143(3) of the Act and reopening is beyond 4 years, the issue is squarely covered in favour of the assessee Issues Involved:1. Failure of the Assessing Officer (AO) to point out the failure of the assessee to disclose fully and truly all material facts necessary for assessment.2. Permissibility of reopening assessment beyond four years based on factual error or omission pointed out by the audit party.3. Contravention of the decision with explanation 2(c)(i) & (iv) of Section 147 of the Income Tax Act.Issue-wise Detailed Analysis:1. Failure of the AO to Point Out Assessee's Failure to Disclose Material Facts:The core issue in this appeal is the CIT(A)-NFAC's decision that the AO failed to demonstrate any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The CIT(A)-NFAC observed that all the grounds for the AO's 'reason to believe' originated from documents already filed by the assessee during the original assessment proceedings. There was no fresh material presented by the AO to justify the reopening of the assessment. The CIT(A)-NFAC relied on the Supreme Court's decision in CIT Vs Kelvinator of India Ltd, which held that reassessment based on a mere change of opinion is not permissible. The absence of new information and the lack of any failure by the assessee to disclose material facts led the CIT(A)-NFAC to quash the reassessment.2. Permissibility of Reopening Assessment Beyond Four Years:The Revenue argued that reopening the assessment beyond four years is permissible under law based on factual error or omission pointed out by the audit party, citing the Supreme Court's decision in P.V.S.Beedies Pvt Ltd. However, the CIT(A)-NFAC found that the reasons recorded by the AO did not indicate any failure by the assessee to disclose fully and truly all material facts necessary for the assessment. The CIT(A)-NFAC referenced the Supreme Court's decision in NDTV vs DCIT, which upheld that reassessment beyond four years cannot be initiated if the primary facts were already disclosed by the assessee. Thus, the CIT(A)-NFAC concluded that the reopening of the assessment was not permissible under the proviso to Section 147 of the Income Tax Act.3. Contravention with Explanation 2(c)(i) & (iv) of Section 147:The Revenue contended that the CIT(A)-NFAC's decision contravened explanation 2(c)(i) & (iv) of Section 147, which deems certain cases as income chargeable to tax escaping assessment. However, the CIT(A)-NFAC found that the AO's reasons for reopening the assessment did not demonstrate any failure by the assessee to disclose material facts. The CIT(A)-NFAC emphasized that the reasons recorded by the AO were based on information already available during the original assessment, and there was no new material to justify the reassessment. The Tribunal upheld this view, noting that the reassessment was barred by limitation under the proviso to Section 147, as there was no failure by the assessee to disclose material facts.Conclusion:The Tribunal confirmed the CIT(A)-NFAC's order quashing the reassessment, concluding that the AO's reasons for reopening the assessment were based on a change of opinion without any new material facts. The reassessment was deemed invalid as it was initiated beyond four years without demonstrating any failure by the assessee to disclose fully and truly all material facts necessary for the assessment. The appeal filed by the Revenue was dismissed.