Validity of notice issued after expiry of four years from end of the relevant assessment year

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517
Assessement

Income Tax Act, 1961, Section 148

ReassessmentValidityNotice issued after expiry of four years from end of the relevant assessment year

Conclusion: Where notice under section 148 was issued after expiry of four years from end of the relevant assessment year and assessment could not be reopened unless it is demonstrated that income had escaped assessment on account of failure on the part of assessee to disclose all material facts fully and truly in respect of his assessable income, therefore, reassessment was not sustainable and deserved to be quashed.

AO reopened the assessment of assessee on the ground that assessee company have mentioned receipts on account of ‘Monthly Maintenance Income of Rs. 1,62,720 in the trial balance for the period 1-4-2008 to 31-3-2009’, but the same was not shown in the P&L Account and the statement of total income and this had resulted in underassessment of Rs. 1,62,720. Therefore, AO had reason to believe that, by omission on part of assessee to disclose fully and truly all material facts necessary for assessment. Thus, income of assessee had escaped assessment. Held: Notice under section 148 was issued after expiry of four years from end of the relevant assessment year. The interdiction in proviso appended to section 147 puts an embargo in exercise of power at the end of the AO in cases where scrutiny assessment had taken place and four years have expired from the end of relevant assessment year. In such cases, assessment could not be reopened unless it is demonstrated that income had escaped assessment on account of failure on the part of assessee to disclose all material facts fully and truly in respect of his assessable income. AO had re-appreciated trial balance-sheet which was also available to him when original assessment order was passed. Therefore, reassessment was not sustainable and deserved to be quashed.

Decision: In assessee’s favour

 

IN THE ITAT, AHMEDABAD BENCH

RAJPAL YADAV, J.M. AND AMARJIT SINGH, A.M.

Krutika Developers (P) Ltd. v. ITO

ITA No. 3459 & 3460/Ahd/2016

25 June, 2019

Assessee by: Tushar Hemani, Authorised Representative

Revenue by: Virendra Singh, Senior Departmental Representative

ORDER

Rajpal Yadav, J.M.

Present two appeals are directed at the instance of the assessee against separate orders of the learned Commissioner(Appeals)-2, Ahmedabad of even dt. i.e. 7-11-2016 passed on the respective appeals of the assessee. ITA No. 3460/Ahd/2016 arose from the assessment proceedings undertaken under section 144 read with section 147 in the assessment year  2009-10; whereas ITA No.3459/Ahd/2016 has arisen from penalty proceedings initiated by the assessing officer under section 271(1)(c) of the Act in the Asstt.year 2009-10.

2. First we take quantum appeal. In Ground No. 1, the assessee has challenged reopening of the assessment by issuance of notice under section 148 of the Income Tax Act.

3. With the assistance of the learned representatives we have gone through the record carefully. It emerges out from the record that the assessment order was passed under section 143(3) on 20-9-2011 assessing total income at Rs. NIL. The assessing officer thereafter reopened the assessment by recording following reasons:

“Reasons for reopening of assessment

The assessee company has filed return of income on 30-9-2009 declaring total income “NIL”. The assessee company have mentioned receipts on account of ‘Monthly Maintenance Income of Rs. 1,62,720 in the trial balance for the period 1-4-2008 to 31-3-2009’, but the same was not shown in the P&L Account and the statement of total income and this has resulted in underassessment of Rs. 1,62,720.

I therefore, reason to believe that, by omission on part of assessee to disclose fully and truly all material facts necessary for the assessment. The income of assessee company has escape the assessment within the meaning of section 147 of the Act. Issued notice under section 148 of the Act for assessment year 2009-10.

Sd

(DEEPAK PAREEK)

Income Tax Officer,

Ward – 2(1)(2), Ahmedabad.”

Date: 21-11-2014

Place: Ahmedabad

4. Notice under section 148 of the Act was issued on 21-11-2014.

The assessing officer thereafter passed assessment order ex parte on 31-7-2015 under section 144 read with section 147. He made addition of Rs. 1,62,720. On perusal of the above reasons, we find that the learned assessing officer has re-appreciated the trial balance which was already available to him when he passed original assessment order under section 143(3) of the Act. He has not taken cognizance of any fresh information. It is also pertinent to observe that notice under section 148 of the Act was issued after expiry of four years from end of the relevant assessment year. Notice was issued on 21-11-2014 whereas four years for the assessment year  2009-10 will expire on 31-3-2014. Since scrutiny assessment was also there in this case, and in that situation, proviso appended to section 147 would come to the rescue of the assessee. The interdiction in the proviso appended to section 147 puts an embargo in the exercise of power at the end of the assessing officer in cases where scrutiny assessment has taken place and four years have expired from the end of relevant assessment year .

In such cases, the assessment cannot be reopened unless it its demonstrated that income has escaped assessment on account of failure on the part of the assessee to disclose all material facts fully and truly in respect of his assessable income. A perusal of the reasons would indicate that no such circumstances have been pressed by the assessing officer. He has re-appreciated trial balance-sheet which is also available to him when original assessment order was passed. Therefore, reassessment is not sustainable. It deserves to be quashed. Accordingly, we quash the re-assessment order.

5. As far as levy of penalty under section 271(1)(c) of the Act is concerned, we find that sub-clause (iii) of section 271(1)(c) provides mechanism for quantification of penalty. It contemplates that the assessee would be directed to pay a sum in addition to taxes, if any, payable by him, which shall not be less than , but which shall not exceed three times the amount of tax sought to be evaded by reason of concealment of income or furnishing of inaccurate particulars of income.

In other words, the quantification of the penalty is depended upon the addition made to the income of the assessee. In the present case, since we have already quashed re-assessment order, the very basis for computation of such penalty has been extinguished. Therefore, no penalty is imposable on the assessee. It is cancelled and ground of appeal of the assessee is allowed.

6. In the result, both appeals of the assessee are allowed.

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