The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) has held that no reopening can be done after the expiry of four years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for the reasons of the failure on the part of the assessee to disclose truly and wholly all material facts necessary for the assessment.
Karrm Infrastructure Private Limited, the appellant assessee is in the business of builders and developers constructing affordable houses for the public. It has declared its total income. The assessment was completed, accepting the trading results, purchases, and sales.
The case has been reopened on the grounds that there were certain payments to various parties on account of some fake bills. One purchase was made from M/s. Shah Steel Corporation and another was from M/s. Swarn Rerolling Mill Pvt. Ltd. From the information in the public domain, it was found that these entities were non-filers, and therefore, purchases made by two parties are unexplained.
The Income Tax AO has disposed of the assessee’s objection to reopening without even discussing it in the assessment order. The AO held that the assessee had not furnished any substantial material evidence to prove the genuineness of the transaction, and accordingly, he added the entire purchase.
The two-member bench of Amit Shukla (Judicial Member) and Gagan Goyal (Accountant Member) has observed that the assessment was already completed under Section 143(3) by the order dated March 20, 2016.
The case has been reopened on some Income Tax Business Application ( ITBA ) databases where the parties from whom the assessee made purchases were found to be non-filers of GST, and simply based on this information, the assessment has been reopened under Section 148 to make the addition on account of purchases that already stood examined earlier as they are part of the trading amount.
While allowing the appeal, the Tribunal held that the time limit for reopening and the assessment as was applicable at the time of issuance of the Income tax reassessment notice is three years from the end of the relevant assessment year.
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