No failure to provide Material Facts: ITAT sets aside Reassessment Proceedings initiated after Expiry of 4 Years [Read Order]

The Mumbai Bench of Income Tax Appellate tribunal (ITAT) has set aside the reassessment proceedings initiated after the expiry of 4 years as there was no failure to provide material facts.

The assessee, Fornax Real Estate Ltd was engaged in the business of development of real estate projects. For the year under consideration, the assessee filed its return of income on 27/09/2012, and order on 20/02/2015 passed under section 143(3) of the Act. Subsequently, vide notice dated 29/03/2019 issued under section 148 of the Act reassessment proceedings were initiated in the case of the assessee. 

The AO, passed order on 30/12/2019 under section 143(3) read with section 147 of the Income Tax Act held that the assessee had failed to substantiate that the income shown by the assessee in its profit and loss account pertains to its business activity of development of real estate. The AO had further held that the assessee had failed to substantiate with documentary evidence that the expenses were incurred wholly and exclusively for its stated business activity. The assessee raised additional ground challenging the invocation of jurisdiction under section 147 of the of the Income Tax Act.

K. Gopal, on behalf of the assessee submitted that the reassessment proceedings in the present case were initiated after the expiry of 4 years from the end of the relevant assessment year and therefore, the conditions laid down in 1st proviso to section 147 of the Act had to be satisfied.

He further submitted that all the details were furnished by the assessee during the course of original assessment proceedings and there was no failure to disclose truly and fully all material facts.

Ankush Kapoor, on behalf of the revenue submitted that the assessee had failed to bring on record the relevant materials.

As per 1st proviso to section 147 of the Income Tax Act, in a case where the assessment was completed under section 143(3) of the Income Tax Act , reassessment under section 147 of the Income Tax Act can be done after the expiry of 4 years from the end of the relevant assessment year only if income has escaped assessment (i) due to failure on the part of the assessee to make a return under section 139 or in response to notice issued under section 142(1) or section 148; or (ii) due to failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment.

The two-member Bench of Prashant Maharishi, (Accountant Member) and Sandeep Singh Karhail, (Judicial Member) allowed the petition filed by assessee and dismissed the appeal filed by the revenue and set aside the reassessment proceedings under section 147 of the Income Tax Act, being bad in law observing that, w that conditions laid down in 1st proviso to section 147 of the Income Tax Act 1961 were not satisfied in the present case.

“In the present case, from the facts, it was evident that assessment was completed in the case of the assessee under Section 143(3) of the Act. Further, notice under Section 148 of the Act was issued on 29/03/2019, beyond a period of 4 years from the end of the relevant assessment year on 2012-13. Therefore, it needs to be examined whether the conditions prescribed in 1st provision to section 147 of the Act are satisfied in the present case,” the Bench further observed.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates