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Re-assessment proceedings are unsustainable when there are no allegations of assessee having failed to make full & true disclosure of material facts: HC

2019-TIOL-1998-HC-AHM-IT

IN THE HIGH COURT OF GUJARAT

AT AHMEDABAD

R/Tax Appeal No. 264 Of 2019

PRINCIPAL COMMISSIONER OF INCOME TAX
RAJKOT-I

Vs

RAJENDRASINH AJITSINH JADEJA

J B Pardiwala & A C Rao, JJ

Dated: July 09, 2019

Appellant Rep by: Mrs Mauna M Bhatt(174)
Respondent Rep by: 
None

Income tax – Sections 147 & 148

Keywords – escaped assessment – full disclosure – reasons for reopening

THE Revenue Department preferred the present appeal challenging the action of ITAT in quashing the reassessment proceedings initiated u/s 147 on the ground that it had been been made beyond four years without any allegation that income chargeable to tax had escaped assessment for such assessment year by reason of failure on the part of assessee to disclose fully & truly all material facts necessary for his assessment.

On appeal, the HC held that,

Whether initiation of reassessment without any allegation regarding failure on part of assessee to disclose fully & trully all material facts, is invalid – YES: HC

++ the finding of fact recorded by the Tribunal is to the effect that the initiation of reassessment proceedings u/s 143(3) had been made beyond the period of four years by issuing notice u/s 148 without any allegation that income chargeable to tax had escaped assessment for such assessment year by reason of failure on the part of assessee to disclose fully and truly all the material facts necessary for his assessment for that assessment year. The Tribunal, while concurring findings recorded by the CIT(A) clearly held that the initiation of reassessment proceedings u/s 147 was bad in law. In view of concurrent findings recorded by the two Revenue authorities, the issue stands answered in favour of assessee.

Revenue’s appeal dismissed

JUDGEMENT

Per: J B Pardiwala:

1. This Tax Appeal under Section 260A of the Income Tax Act, 1961 [for short, “the Act, 1961”] is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Rajkot Bench, Rajkot dated 26th November 2018 in the ITA No.74/RJT/2013 for the assessment year 2005-06.

2. The Revenue has proposed the following question of law:

“Whether the Appellate Tribunal has erred in law and on facts in upholding the decision of CIT(A) quashing the proceedings initiated under Section 147 of the Act?”

3. The findings recorded by the Tribunal as regards the proposed question are as follows:

“10. The second basis for treating the reassessment proceedings and order as bad in law is noncompliance of first proviso to S. 147 of the Act. Undisputedly and admittedly, the initiation of reassessment proceedings for AY 2005-06 was done by the AO by way of recording reasons and issuing notice u/s. 148 of the Act on 22.06.2010 i.e. beyond four years of completion of relevant assessment year. As per requirement of first proviso to S.147 of the Act for initiation of reassessment proceedings regarding assessment order framed u/s. 143(3) of the Act, beyond four years, it is required from the AO to record clear finding that the income chargeable to tax has escapement assessment for such assessment year by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year otherwise reopening of assessment order framed under scrutiny u/s. 143(3) of the Act cannot be made.

11. In the present case, the initiation of reassessment proceedings of assessment order passed u/s. 143(3) of the Act has been made beyond four years by issuing notice u/s. 148 of the Act on 22.06.2010 without any allegation that the income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year therefore, the ld. CIT(A) was justified in holding that the initiation of reassessment proceedings u/s. 147 of the Act is bad in law and the first appellate order is correct in quashing the initiation of reassessment and all consequent proceedings and others including impugned reassessment.”

4. Thus, the finding of fact recorded by the Tribunal is to the effect that the initiation of reassessment proceedings under Section 143(3) of the Act had been made beyond the period of four years by issuing notice under Section 148 of the Act without any allegation that the income chargeable to tax had escaped assessment for such assessment year by reason of the failure on the part of the assessee to disclose fully and truly all the material facts necessary for his assessment for that assessment year. The Tribunal, while concurring findings recorded by the CIT(A) clearly held that the initiation of reassessment proceedings under Section 147 of the Act was bad in law.

5. In view of concurrent findings recorded by the two Revenue authorities, we are not inclined to disturb the order passed by the Tribunal. No error much less an error of law could be said to have been committed by the Tribunal in passing the impugned order. This appeal, therefore, fails and is hereby dismissed.

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