2025 (7) TMI 1687 - AT - Income Tax

Reopening of assessment u/s 147 - reasons to believe - Justification for formation of the reasons recorded - HELD THAT - We find substance in the submission of Ld. AR that the failure on the part of assessee in disclosing fully and truly all material facts which should have been brought on record compulsorily as per 1st proviso to section 147 which is the basis of reopening in the present case could not be met out by the revenue. Further nothing could be brought on record before us also to substantiate that there was a failure on the part of assessee in disclosing fully and truly all material facts during the original assessment therefore we are of the considered view that in absence of such information in the reasons recorded by the Ld. AO the assumption of jurisdiction u/s 147 148 of the Act itself is in violation of mandatory provisions of law thus stands ultra vires exceeding to the jurisdictional restraints imposed by the 1st proviso to Section 147 of the Act therefore the entire proceedings initiated u/s 147 vitiates and the impugned assessment order passed u/s 147 dated 19.03.2022 on the foundation of such ultra vires or void ab initio proceedings does not have the lawful strength to sustain accordingly we quashed the same. Effect of absence of supply of the reasons recorded for reopening of assessment - As following the principal of law and analogy of interpretation accorded in the case of Videsh Sanchar Nigam 2011 (7) TMI 715 - BOMBAY HIGH COURT Jagat Talkies Distributors 2017 (9) TMI 192 - DELHI HIGH COURT Shodiman Investments Pvt. Ltd. 2018 (4) TMI 1287 - BOMBAY HIGH COURT we are of the considered view that in absence of supply of the reasons recorded for reopening of assessment even after assessee s request so as to enable to object to the same the reassessment framed cannot be upheld and would make the order passed on reassessment bad in law. That if the reasons recorded in support of the reopening notice are not provided to the assessee the same would be contrary to and in defiance of the decision of the Apex Court in GKN Driveshaft 2002 (11) TMI 7 - SUPREME COURT . Thus non furnishing of reasons to assessee would make the assessment order bad in law - Assessee appeal allowed.

Summary

ISSUES:

Whether reopening of assessment under Section 147/148 of the Income Tax Act, 1961 after the expiry of four years is valid without specific disclosure of failure by the assessee to fully and truly disclose all material facts necessary for assessment'Whether the Assessing Officer's recording of satisfaction for reopening under Section 147 must specify the material facts not disclosed by the assessee'Whether non-furnishing of the reasons recorded for reopening and the approval under Section 151 to the assessee violates principles of natural justice and renders reassessment proceedings invalid'Whether additions made by the Assessing Officer treating share application money as unexplained cash credit under Section 68 and payments as unexplained expenditure under Sections 69B and 69C are justified'Whether the assessment order passed without providing due and proper opportunity to the assessee violates principles of natural justice?

RULINGS / HOLDINGS:

Reopening of assessment under Section 147 beyond four years from the end of the relevant assessment year is invalid if the Assessing Officer fails to specify the "failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment," and mere general statements of failure are insufficient.The Assessing Officer must "indicate what was the material fact that was not truly and fully disclosed" to justify reopening beyond four years; failure to do so renders the reopening ultra vires and void ab initio.Non-furnishing of the reasons recorded for reopening and the approval under Section 151 to the assessee, despite specific requests, violates the mandate of law and principles of natural justice, making the reassessment proceedings and consequent order bad in law and liable to be quashed.Additions made by the Assessing Officer on account of share application money treated as unexplained cash credit under Section 68 and payments treated as unexplained expenditure under Sections 69B and 69C are not adjudicated upon due to quashing of reassessment orders; hence, such contentions remain open.Assessment orders passed without providing due and proper opportunity to the assessee violate principles of natural justice and are liable to be quashed.

RATIONALE:

The Court applied the statutory framework of Section 147 of the Income Tax Act, 1961, particularly the first proviso which restricts reopening beyond four years unless there is a failure by the assessee to disclose fully and truly all material facts necessary for assessment.Judicial precedents were relied upon, including rulings that emphasize the Assessing Officer's duty to record specific reasons and material facts constituting failure by the assessee, and prohibit reopening based on mere change of opinion or general statements.Non-compliance with mandatory procedural requirements such as furnishing reasons recorded and approval under Section 151 to the assessee was held to violate principles of natural justice, as established by authoritative case law.The Court noted that the Assessing Officer's satisfaction must be based on tangible material and independent evaluation, not merely on audit objections or third-party inputs, following established jurisprudence.The Court refrained from adjudicating on merits of additions or other contentions once the foundational reopening orders were quashed for jurisdictional defects, thereby preserving issues for future consideration if reassessment is validly initiated.