Assessment can’t be Re-Opened When there is No Failure on the part of Assessee to Disclose Material facts: ITAT [Read Order]

DRP- ITAT

The Mumbai bench of Income Tax Appellate Tribunal recently declared that assessment cannot be re-opened by invoking sections 147/148 of the Income Tax Act when there is no failure on the part of the assessee to disclose material facts.

The captioned appeal by the assessee is directed against the order of CIT (A)-12, Mumbai dated 09.09.2015 pertaining to the Assessment Year 2006-07.

The appellant- Company is engaged in the business of manufacture of pharmaceutical products and the return filed by the assessee originally was subject to a scrutiny assessment u/s 143(3) of the Act determining the income at Rs.14,56,38,663/-. The AO opened a reassessment under section 148 of the Act through a notice issue by stating the reason that certain income chargeable to tax had escaped assessment to the extent of Rs.41,13,000/-

The counsel of assessee has challenged the reopening of assessment before the tribunal that since the reopening was after a period of 4 years from the end of the relevant assessment year and also added that there was no failure on the part of the assessee to disclose all the material facts and, therefore, the reopening was not justified.

On the other hand, the DR appearing for the Revenue has defended the initiation of proceedings u/s 147/148 of the Act by relying on the reasons recorded by the Assessing Officer as well as relying on the order of the CIT (A) on this issue.

While hearing both the parties contention the Tribunal observed that reopening of assessment after four years where the original assessment has been completed u/s 143(3) of the Act shall be valid only if there was a failure on the part of the assessee to disclose fully and truly all the material facts necessary for its assessment.

The bench, while going through the facts, opinioned that the point to be examined is as to whether all material facts were available to the Assessing Officer on the impugned issue or else, was there a failure on the part of the assessee to disclose the material facts.

The stand of the Revenue was that there was a failure to make full and true disclosure of material facts as required by the proviso to Sec. 147 of the Act. The tribunal suggested that during the original assessment proceedings, assessee disclosed the details of selling and distribution expenses and also the various elements of expenses debited therein, including that of advertisement giveaways and interview plans. Therefore, the Assessing Officer was quite aware of the expenditure.

Finally the bench comprising G.S. Pannu, Accountant Member and Ram Lal Negi, Judicial Member uphold the decision of assessee and declared that there has been no failure on the part of the assessee to disclose the material facts as required by the proviso to Sec. 147 of the Act and thus the initiation of proceedings by issuance of notice u/s 147/148 of the Act was vitiated.

Subscribe Taxscan Premium to view the Judgment
taxscan-loader