2024 (11) TMI 316 - AT - Income Tax

Reopening assessment under section 147 beyond four years invalid without material fact suppression allegation

ITAT Patna held that reopening of assessment under section 147 beyond four years was invalid as conditions precedent were not satisfied, with no ... Reopening of assessment u/s 147 - notice beyond four years - HELD THAT:- We are of this opinion that conditions precedent for reopening of the assessment beyond four years are not satisfied. There is no allegation of suppression of material fact. Accordingly, this issue is decided in favour of the assessee thereby holding that reopening after four years is bad in law. On this score only, the assessment proceedings and further proceedings of the ld. CIT(A) cannot be said to be valid, accordingly set aside. Jurisdiction passed by ITO, Ward-2(1), Patna for Issuance of notice - We have gone through the disposal of objection with regard to the jurisdiction passed by ITO, Ward-2(1), Patna that reflects that the issue of jurisdiction has been denied only on this ground that earlier jurisdiction lies with AO, Patna since issue of the PAN and as per the AO since no objection whatsoever has been raised by the earlier, hence, jurisdiction lies on the AO, Patna. We hereby hold that the issuance of notice by the AO, Patna is bad in law and on this score also, order passed by the ld. AO as well as ld. CIT(A) is against the law and accordingly, both the orders are hereby set aside. Appeal filed by the assessee is allowed. Issues Involved:1. Reopening of assessment after four years.2. Issuance of notice under Section 148 of the Income Tax Act without jurisdiction.Detailed Analysis:1. Reopening of Assessment After Four Years:The primary issue raised by the assessee was the reopening of the assessment for the Assessment Year (AY) 2015-16 after more than four years, which was challenged as being contrary to the provisions of the Income Tax Act. The assessment order was originally passed on 27.12.2017, and the notice under Section 148 was issued on 31.03.2021, exceeding the four-year limitation period prescribed under Section 149(1)(b) of the Act. The assessee argued that the reopening did not meet the conditions set forth in Section 147, as there was no indication of any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.The Tribunal referred to several judgments, including the Calcutta High Court's decision in Calcutta Club Ltd vs ITO, which emphasized that reopening beyond four years is unsustainable if there is no evidence of the assessee's failure to disclose material facts. The Tribunal found that the reasons recorded for reopening lacked any reference to such a failure by the assessee. Furthermore, during the original assessment, the assessee had provided detailed responses to the queries raised by the Assessing Officer (AO), which were duly considered. Consequently, the Tribunal concluded that the conditions for reopening the assessment beyond four years were not satisfied, and thus, the reopening was invalid.2. Issuance of Notice Under Section 148 Without Jurisdiction:The second issue pertained to the jurisdiction of the notice issued under Section 148. The assessee contended that the notice was issued by the Income Tax Officer (ITO), Ward-2(1), Patna, despite the assessee's registered office being located in Kolkata. The assessee argued that the jurisdiction should have been with the ITO in Kolkata, as per the CBDT's notification under Section 120 of the Act, which determines the territorial jurisdiction based on the location of the business or residence of the assessee.The Tribunal examined the objection raised by the assessee regarding jurisdiction and noted that the objection was filed promptly after the notice was issued. The assessee also provided evidence, including the income tax return acknowledgment, showing the Kolkata address. The Tribunal cited the decision of the ITAT Delhi Bench in ACIT vs. U V Realtors Pvt. Ltd., which clarified that the jurisdiction of the AO is determined by the CBDT's notification and not merely by the address associated with the Permanent Account Number (PAN).The Tribunal found that the ITO, Patna, lacked jurisdiction over the assessee, as the business operations and registered office were in Kolkata. Therefore, the issuance of notice by the AO in Patna was deemed invalid. Consequently, the orders passed by the AO and the Commissioner of Income Tax (Appeals) [CIT(A)] were set aside on the grounds of lack of jurisdiction.Conclusion:In conclusion, the Tribunal allowed the appeal filed by the assessee, holding that both the reopening of the assessment beyond four years and the issuance of notice without jurisdiction were invalid. The assessment proceedings and subsequent orders were set aside, and the appeal was decided in favor of the assessee.