No Jurisdiction of AO in Reopening of Assessment after 4 years by Reason of Failure on part of assessee: Madras HC [Read Judgment]

The High Court of Madras held that there is no jurisdiction of Assessing officer (AO) in the reopening of Assessment after 4 years by reason of failure on part of the assessee.

The Assessing Officer, vide Assessment Order pertains to the Assessment Year, dealt with the Return of Income filed by the respondent Company, M/s.SKI Retail Capital Ltd in and by which total income was admitted. The return of income was processed under Section 143(1) of the Income Tax Act, 1961.

The AO noticed certain income chargeable to tax has escaped assessment for the Assessment Year and subsequently, the case was reopened under Section 148 of the Act by the issuance of notice and in response to the same, the respondent/assessee has sent a letter stating that the return of Income already filed by him be treated as Return filed by him in compliance with Notice.

The Assessing Officer, after considering and scrutinizing the materials, had treated the credit balance amounting to Rs.5,30,99,960/- as deemed dividend in the hands of the respondent-company and completed the scrutiny assessment.

Aggrieved by the said Assessment, the respondent-company filed an appeal before the Commissioner of Income Tax (Appeals). The appellant/assessee before the CIT (Appeals) contended that the notice under Section 148 of the Income Tax Act was issued after 4 years from the Assessment Order despite the fact that there was no failure on the part of the assessee to furnish truly and fully all material facts necessary for assessment.

The appellant-assessee also took a stand that reopening of the assessment is purely on account of audit objections for which the Assessing Officer himself sent a reply that there is no justification for raising objections and the assessment can be reopened only if the Assessing Officer is in possession of tangible materials/facts on the basis of which, he had reason to believe that income had escaped assessment.

The Revenue, aggrieved by the order of CIT(A) in partly allowing the appeal filed by the assessee and dismissal of their grounds pertaining to the assessment, filed before the Income Tax Appellate Tribunal (ITAT) the Assessing Officer has not independently satisfied himself about the escapement of income and further found that in the absence of any material, is of the considered opinion that the reopening of assessment is not justified and accordingly, quashed the order of the Assessing Officer.

The division bench consisting of Justice M. Sathyanarayanan and Justice Abdul Quddhose uphold the decision of the lower authority in the light of various presidents and held that there is no jurisdiction of Assessing officer (AO) in reopening of Assessment after 4 years by reason of failure on part of the assessee.

The bench while allowing the matter in the favor of the assessee said, “This Court, on an independent application of mind and on thorough consideration of material aspects and legal position, is of the considered view that there is no error or infirmity in the reasons assigned by the ITAT in dismissing the appeal filed by the Revenue and allowing of the cross objection filed by the assessee.”