The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has set aside the reopening done after 4 years as the escapement of income was not reflected and material facts were truly and fully discussed at the time of original assessment.
The assessee company, IOT Anwesha Engineering and Projects Ltd engaged in the business of fabrication and erection, e-filed its return of income through electronic media declaring total income, which was initially processed under Section 143(3) of the Income Tax Act dated 29.11.2011. The assessment was finalised upon determining the total income at and subsequently revised on 03.10.2013 in terms of the appeal order passed by the CIT(A) on 02.08.2013.
Subsequently, the assessment proceeding under Section 147 of the Income Tax Act was initiated upon taking approval from the CIT and notice dated 27.02.2015 under Section 148 of the Income Tax Act was served upon the assessee on 03.03.2015. By and under the reply dated 04.06.2015, the assessee requested to treat the return filed under Section 139(1) of the Income Tax Act as return filed against the notice issued under Section 148 of the Income Tax Act.
The assessee claimed expenses on account of duties and taxes out of which a sum pertained to claim of expenses on account of VAT payment. In fact, the assessee paid VAT by 31.03.2008. The balance amount remained unpaid and shown as outstanding liability as on 31.03.2008 and neither the said amount was paid before the due date of filing of return. Show cause notice under Section 142(1) of the Income Tax Act, therefore, was issued to the assessee to show as to why disallowance may not be made in view of provisions of Section 43B of the Income Tax Act.
Akhilendra Pratap Yadaw, on behalf of the assessee questioned the very validity of reopening of assessment under Section 147 of the Income Tax Act initiated beyond the period of 4 years from the end of relevant assessment year.
He contended that as the assessee already had furnished return under Section 139 of the Income Act, the second condition of escapement of income due to failure on the part of the assessee was required to be established by the Revenue while reopening under Section 147 of the Income Tax Act after 4 years from the end of the assessment year as contended by the assessee. No proper satisfaction had been recorded by the AO while recording reasons
M. J. Shah appeared on behalf of the revenue.
The two-member Bench of Annapurna Gupta, (Accountant Member) and Madhumita Roy, (Judicial Member) dismissed the appeal filed by the revenue holding that as the precondition for initiation of proceeding under Section 147 of the Income Tax Act by recording reasons of income, escaping assessment was not reflecting from the said order of reopening due to the failure on the part of the assessee, the same was not found to be sustainable and hence liable to set aside.
The Bench further observed that when the material facts were truly and fully discussed at the time of original assessment, initiation of proceedings to reopen on the same set of facts held to be invalid and neither any allegation had been labelled against the assessee by the AO while reopening assessment under Section 148 of the Income Tax Act in failing to disclose fully or truly all material facts necessary for assessment which admittedly goes against such reopening of assessment by the department.
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