ACIT Vs Perfect Corporate Services Ltd

Reopening of assessment after the expiry of 4 years of assessment, based on information from Investigation Wing without verifying the assessment records and without application of mind by AO to form a belief is correct

– Revenue’s appeal dismissed: MUMBAI ITAT

Whether reopening of assessment after the expiry of 4 years of assessment, based on information from Investigation Wing without verifying the assessment records and without application of mind by AO to form a belief is correct – NO : ITAT

++ AO while recording the reasons is not aware about the actual amount received by assessee as share application money. As evident from the details filed by the assessee during the course of first reopening of assessment that the assessee has received share application money from parties only i.e. amounting to Rs.66 lacs. Counsel for the assessee argued that the AO has no reason to belief that the income to the extent of Rs.1,54,30,000/- or Rs.66 lacs has escaped assessment except the information received by the AO from the Investigation Wing. Receipt of information from Investigation Wing without verifying the assessment records and without application of mind, the AO cannot form the basis of formation belief that the income has escaped assessment particularly after expiry of 4 years and originally the assessment was competed under section 147 of the Act read with section 143(3) of the Act exactly on same reasons;

++ Supreme Court in the case CIT vs. Foramer France – 2003-TIOL-88-SC-IT has taken the view that the first proviso to section 147 of the Act lays down an exception whereby the AO is not permitted to exercise his jurisdiction in reopening the assessment beyond a period of four years from the end of the relevant assessment year. Once the exception carved out by proviso to s. 147 of the Act comes into play, the case would fall outside the ambit of s. 147 of the Act. As per proviso to s. 147 of the Act, no action under this section can be taken after expiry of four years from the end of the relevant assessment year, unless income chargeable to tax had escaped assessment by reason of failure of the assessee to make full and true disclosure of all material facts necessary for assessment. In case, there being no whisper in the reasons supplied to assessee that income escaped assessment by reason of assessee’s failure to make a full and true disclosure of all material facts necessary for assessment, notice under section 148 of the Act issued beyond four years from the end of relevant assessment year was barred by limitation under proviso to s. 147 of the Act, hence without jurisdiction. If either of these conditions is not fulfilled the notice is without jurisdiction. If the notice issued u/s 148 fails to satisfy either of the conditions, it deserves to be quashed. However, the officers have many time issued notices for reopening the assessments even beyond four years from the end of the assessment year without fulfillment of any of the legal conditions as stipulated in the first proviso to this section. Such an action of the revenue authorities is strictly challenged by the taxpayers at large in the court of law and courts have quashed the notice issued by Revenue authorities or quashed the re-assessment orders. It was decided to confirm the order of CIT(A) quashing the re-assessment proceedings and allow this issue of Revenue’s appeal. In the result, the appeal of Revenue is dismissed and the CO of the assessee is allowed.

ITA No.3100/Mum/2017