2022 (4) TMI 22 - AT - Income Tax

Reopening of assessment u/s 147 - reopening beyond four years - HELD THAT - Assessee was reopened u/s 147 after a period of four years from the end of the assessment year. The proviso to section 147 which mandates that the re-opening beyond 4 years from the end of relevant assessment year can only made if underassessment or escapement is by reasons of the failure of the assessee to disclose any material facts. Thus reopening of assessment after expiry of four years can only be made if the condition as laid down in the proviso to Section 147 of the Act are satisfied that is failure on the part of the assessee to truly and fully disclose any material fact or information which ultimately leads to escapement of income. Assessee has made full disclosure of these transactions in the books of account which have been examined at length by the AO during the course of original assessment proceeding. Therefore the reopening of assessment u/s 147 in the present case without any reference to failure on the part of the assessee to disclose all facts regarding the said loans in the return of income books of account and also during the assessment proceeding is not justified and is in violation to proviso to section 147 - The case of the assessee finds support from the decision of New Delhi Television Ltd. 2020 (4) TMI 133 - SUPREME COURT wherein it has been held that where the assessee has disclosed all material facts qua the issuance of convertible bonds thus there was no failure on the part of the assessee to disclose material facts and therefore notice issued to the assessee u/s 147 of the Act after a period of 4 years has been quashed. Assessment was completed u/s 143(3) and thereafter the AO received the information from Investigation Wing that the assessee has received bogus loans in the form of accommodation entries and on that basis the case of the assessee was reopened. The assessment was reopened after a period of more than 4 years on the ground that sources of loan funds were not explained. Considering the facts of the present case before us in the light of the aforesaid decisions we are inclined to hold that the reopening of assessment is invalid and is accordingly quashed. The cross objection of the assessee is allowed.

Summary

Issues:
1. Challenge to the order of Ld.CIT(A) on merit by the revenue.
2. Challenge to the order of Ld. CIT(A) on legal issue by the assessee.
3. Reopening of assessment u/s 147 r.w.s. 148 of the Act.
4. Validity of reopening assessment beyond four years.
5. Disclosure of material facts by the assessee.
6. Compliance with proviso to Section 147 of the Act.
7. Legal precedents supporting the assessee's case.

Analysis:

1. The appeal by the revenue and cross-objection by the assessee were filed against the order dated 16.09.2020 passed by the Ld.CIT(A) arising from the order passed u/s 143(3) r.w.s. 147 of the Act dated 08.12.2018 by the Assessing Officer relevant to A.Y 2011-12. The revenue challenged the order of Ld.CIT(A) on merit, while the assessee challenged the order on the legal issue, specifically regarding the reopening u/s 147 r.w.s. 148 of the Act.

2. The assessee raised legal and jurisdictional issues in the cross objections, primarily contesting the validity of the reopening of assessment u/s 147 of the Act. The Ld. CIT(A) allowed the appeal of the assessee on merit, directing the AO to delete the addition of Rs. 2 crore, acknowledging that the necessary evidences were provided to prove the identity, creditworthiness of the lenders, and genuineness of the transactions.

3. The case of the assessee was reopened u/s 147 by the AO based on information received regarding accommodation entries. The AO made an addition of Rs. 2,00,00,000 u/s 68 of the Act towards unexplained cash credit. The assessee challenged this before the First Appellate Authority on jurisdictional issue and merit.

4. The Tribunal noted that the assessment was reopened after four years from the end of the assessment year. The proviso to section 147 mandates that reopening beyond four years can only be done if there is a failure on the part of the assessee to disclose material facts leading to escapement of income. The Tribunal found that the reopening in this case, without any failure on the part of the assessee to disclose facts, was not justified and violated the proviso to section 147.

5. The Tribunal observed that the assessee had fully disclosed all material facts during the original assessment proceeding, and the reopening lacked justification as there was no failure on the part of the assessee to disclose facts relating to the loans. Legal precedents were cited to support the decision to quash the reopening of assessment.

6. Considering the facts and legal precedents, the Tribunal held that the reopening of assessment was invalid and quashed it, allowing the cross objection of the assessee. Consequently, the appeal of the revenue became infructuous and was dismissed.

7. In conclusion, the cross objection filed by the assessee was allowed, and the appeal by the revenue was dismissed, with the order pronounced on 07.03.2022.