The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that the assumption of jurisdiction for reopening the assessment by the Assessing Officer is bad in law and notice under Section 148 of the Income Tax Act deserves to be quashed.
The assessee M/s Showtime Events [I] Pvt Ltd filed its return of income declaring total income of Rs. 1,33,95,720. Returned income included a sum of Rs. 2,78,75,055, which was part of the fees received from TATA Steel Limited on account of an event to be organized by the assessee for TATA Steel Limited.
The company informed the assessee that due to some unavoidable circumstances, the centenary celebrations event is cancelled and asked the assessee for refund of the amount so paid. The assessee returned Rs. 2,78,75,055 and revised its return of income by reducing Rs. 2,78,75,055 from the originally returned income and declared a loss of Rs. 1,44,79,334.
The assessee informed the Assessing Officer (AO) about the revised return of income and the reasons for the same. The AO completed assessment under Section 143(3) of the Income Tax Act on the basis of the revised return and assessed the total income at a loss of Rs. 1,42,65,253. The AO assumed jurisdiction under Section 154 of the Income Tax Act and rectified the order and recomputed the income at Rs. 1,36,09,802.
The assessee preferred an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], who allowed the appeal of the assessee vide order dated 14.10.2011. On 29.03.2014, the AO assumed jurisdiction under section 147 of the Income Tax Act by issuing notice under Section 148 of the Income Tax Act on the grounds that income has escaped assessment.
Aggrieved by the order the assessee filed an appeal before the Tribunal. The assumption of jurisdiction was under challenge as the notice under Section 148 of the Income Tax Act has been issued after four years.
The Bench comprising of N.K. Billaiya, Accountant Member, and Yogesh Kumar U.S, Judicial Member observed that there is no finding by the AO that there was failure on the part of the assessee to disclose fully and truly all material facts during the original assessment proceedings.
Therefore, the provisions of the 1st proviso to Section 147 of the Income Tax Act squarely apply wherein it has been provided that there has to be a failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment and reasons recorded by the AO should specifically record such failure based on a tangible material and non recording of the same would render the entire reassessment null and void.
It was further noted that the AO has grossly erred in not pointing out the failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment under Section 143(3) of the Income Tax Act. This, in itself, is sufficient to quash the reopening of the assessment.
The assessee himself brought to the notice of the AO the reasons for revising the return of income and assessment was completed on the revised return of income. Therefore, it was well within the knowledge of the AO the refund of Rs. 2,78,75,055, which means that while assuming jurisdiction under Section 147 of the Income Tax Act, there was no new tangible material evidence.
Therefore the Tribunal held that the assumption of jurisdiction for reopening the assessment by the AO is bad in law and notice under Section 148 of the Income Tax Act deserves to be quashed and consequent assessment order also deserves to be quashed.
Hence the Bench quashed the assessment order and so the appeal of the assessee was allowed.
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