The Income Tax Appellate Tribunal (ITAT) Kolkata Bench held that the issue of notice under Section 148 of Income Tax Act, 1961 for reopening of assessment should not be made without reasonable belief.
Assessee, Purulia Central Cooperative Bank Limited filed its return of income in compliance to a notice issued under section 142(1) Income Tax Act. After the scrutiny AO passed an assessment order.
Thereafter on account of some internal audit objection, the assessment of the assessee has been reopened by issuance of a notice under Section 148 Income Tax Act.
The reason for reopening the assessment was that the assessee has claimed carry forward of losses and assessee is a non-scheduled Bank and it has made a provision for NPA of Rs.68,06,656/- before claiming deduction. Then the AO passed the assessment accordingly.
Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeal) {CIT(A)}, who dismissed the appeal . Accordingly, against the order the assessee filed an appeal before the tribunal
During the proceedings M. Goenka, the counsel for the assessee submitted that the notice under section 148 Income Tax Act has been issued after expiry of four years from the end of the relevant assessment year.
Further, the assessment could only be re-opened, if Revenue is able to lay its hand on an information which can demonstrate that the assessee failed to disclose all material facts fully and truly while income was scrutinized under section 143(3) of the Income Tax Act.
According to claim carry forward of loss the assessee said that he did not claim carry forward of loss in the income-tax return for the assessment year 2007-08 and only showed the loss for A.Y. 2007-08.
Further, relating to NPA, assessee contended that being a Cooperative Bank, it is eligible to make a provision for bad and doubtful debts under section 36(viia) of the Income Tax Act and this aspect was already gone into by the Assessing officer in the assessment order passed under section 143(3) Income Tax Act.
Supriya Pal, Counsel for Revenue, supported the decision of lower authorities.
It was observed by the tribunal that if an assessee fails to disclose all material facts fully and truly only, then the assessment could be reopened by issuance of a notice under section 148 Income Tax Act after the expiry of four years where earlier assessment was made either under section 143(3) or under section 147 Income Tax Act.
In the present case, the Assessing Officer failed to pinpoint the failure at the end of the assessee to disclose all material facts fully and truly, which led to the escapement of income from taxation.
The tribunal after reviewing the facts and submissions of the both parties, the two member bench of Rajpal Yadav, (Vice-President) and Rajesh Kumar, (Accountant Member) held that there is no reasonable belief to issue notice under Section 148 of Income Tax Act for reopening Assessment.
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