Reopening based on retrospective amendment after 4 years not permissible in absence of failure in disclosure of material facts by assessee
9:03 amReopening based on retrospective amendment after 4 years not permissible in absence of failure in disclosure of material facts by assessee
Citation of the Case:- M/s. Golden Tobacco Limited (Formerly GTC Industries Limited) vs. The JCIT (ITAT Mumbai), Income tax (Appeal) nos. 5858 & 5859 of 2012, Date of Judgment: 28/10/2015
Brief of the Case
ITAT Mumbai held In the case of M/s. Golden Tobacco Limited (Formerly GTC Industries Limited) vs. The JCIT that the law does not give powers to the AO to reopen an assessment carried out u/s 143(3) after the expiry of four years unless the AO is able to demonstrate that there was failure on the part of the assessee in disclosure of material facts. Even in those cases, where there was a retrospective amendment in the law, no reopening can be done after the expiry of four years unless there was failure on the part of the assessee in disclosure of material facts. In the given case, the AO has nowhere mentioned about any failure on the part of the assessee in disclosure of material facts. Rather what has been mentioned in the reasons is about the omission or mistake committed by the AO himself.
Facts of the Case
Original assessment proceedings were done u/s 143(3) vide order dated 28.12.2007 determining the total income at nil, after set off of brought forward business loss of Rs.7,82,88,126 and brought forward unabsorbed depreciation of Rs.63,64,593. Subsequently, the Assessing Officer issued notice u/s 148 dated 31.3.2011. In response to the same, the assessee-company filed its return of income and asked for the Reasons for reopening of the assessment, which was furnished by the AO to the assessee. The assessee has challenged the aforesaid `Reasons’ on two counts, i.e., One – there is no fresh material coming into the possession of the AO at the time of recording of the reasons, and Two – the reopening has been done after expiry of four years from the end of the assessment year; and there is no allegation in the `Reasons’ about failure on the part of the assessee in disclosure of material facts.
Contention of the Assessee
The assessee-company has challenged the reopening of the assessment. It has been argued that in this case original assessment was done u/s 143(3). Subsequently, notice has been issued u/s 148, after the expiry of four years from the end of the assessment year. It is submitted that there is no allegation in the reasons about any failure on the part of the assessee in disclosure of material facts, and thus, the case of the assessee is protected by the proviso to section 147 of the Act. It has been submitted that the proviso to section 147 puts an embargo of time limit of four years. It is further submitted that apart from the above the reopening is invalid, also on the ground that there is no fresh tangible material coming in the possession of the Assessing Officer at the time of recording of reasons, and therefore, in the absence of the same, no reasons can be recorded for reopening of the assessment.
The reliance was placed on on the judgment of Mumbai Bench of the Tribunal in the case of Motilal R.Todi and various cases discussed and relied in the said judgment. For the purpose of taking benefit of first proviso to section 147, reliance has been placed by the learned Counsel on the judgment of the Hon’ble Bombay High Court in the case of Titanor Components Limited in writ petition No.71 of 2005, order dated 9th June, 2011,Hindustan Lever Ltd. v. ACIT 268 ITR 332 (Bom.), CIT v. Shri Shailesh S.Shah in ITA No.1913 of 2013, order dated 30th September, 2015 (Bombay High Court), and on the judgment of the Hon’ble Supreme Court of India in the case of CIT v. Avadh Transformers (P.) Ltd. 51 Taxmann.com 369 (SC), wherein the judgment of the Hon’ble Allahabad High Court reported at 33 Taxmann.com 24 was upheld by the Hon’ble Supreme Court.
Contention of the Revenue
The ld counsel of the revenue supported the orders of the lower authorities and requested that the reopening should be held as valid.
Held by ITAT
No fresh tangible material
In our considered view, the law in this regard is now well settled. As relied upon by the learned Counsel also, recently Hon’ble Mumbai Bench of the Tribunal in the case of Motilal R.Todi (ITA No.2910/Mum/2013, order dated 22.09.2015) has analyzed the entire law available on this issue, and thereafter it was held by the Hon’ble Bench that reopening was invalid in the absence of fresh tangible material. The Hon’ble Bench has relied upon the judgment of the Hon’ble Bombay High Court in the case of Bombay Stock Exchange Limited, writ petition No.2468 dated 12.06.2014 reported at 89 CCH 118 and judgment of Hon’ble Delhi High Court in the case of Pr.CIT v. Tupperware India Pvt. Ltd. (ITA No.415 of 2015, order dated 10.08.2015).
In view of the above discussion by the Hon’ble Bench, we find that the issue stands squarely covered with the judgment of Hon’ble Bombay High Court, Hon’ble Delhi High Court and other Courts. Therefore, reopening is held invalid for want of availability of requisite conditions for exercising the jurisdiction of reopening by the Assessing Officer.
Non disclosure of material facts by the assessee
The AO has nowhere mentioned about any failure on the part of the assessee in disclosure of material facts. Rather what has been mentioned in the `Reasons’ is about the omission or mistake committed by the AO himself. In our considered view, the law does not give powers to the AO to reopen an assessment carried out u/s 143(3) after the expiry of four years unless the AO is able to demonstrate that there was failure on the part of the assessee in disclosure of material facts.
It may be noted that the reading of the `Reasons’, as reproduced in earlier part of this order, that neither there is any allegation of `failure and disclosure of material facts’ nor AO has made out any case of any failure on the part of assessee in disclosure of material facts. Thus these `Reasons’ are apparently contrary to law.
Further, as has been rightly contended by the learned AR that this issue is no more res integra. Hon’ble Bombay High Court in many judgments has held that in those cases where the first proviso to section 147 is applicable, the reopening cannot be done unless there is allegation in the reasons that there was failure on the part of the assessee in disclosure of material facts. We place our first reliance upon the judgment of Hon’ble Bombay High Court in the case of Tata Business Support Services Ltd. v. DCIT 232 Taxman 702.
We also rely upon the judgment of the Hon’ble Bombay High Court in the case of Titanor Components Limited, supra, and CIT v. Shri Shailesh S.Shah, supra. Further, reliance is placed by us on the judgment of the Hon’ble Supreme Court in the case of CIT v. Avadh Transformers (P.) Ltd. 51 Taxmann.com 369, wherein the Hon’ble Supreme Court has upheld the judgment of the Allahabad High Court, wherein it was held by the Hon’ble High Court that in absence of failure on the part of the assessee in disclosure of material facts, the reassessment proceedings could not be initiated after expiry of four years from the end of relevant assessment year merely on the ground that in view of the retrospective amendment to provisions of section 80IA, the assessee was not entitled to deduction granted earlier under said section. Thus, even in such cases, when there was a retrospective amendment in the law, the Hon’ble Supreme Court has approved the order of the Hon’ble High Court, upholding the view that no reopening can be done after the expiry of four years unless there was failure on the part of the assessee in disclosure of material facts.
In a recent judgment of Hon’ble Delhi High Court in the case of Pr.CIT v. Samcor Glass Ltd. (ITA No.768/2015 dated 12.10.2015), wherein Hon’ble High Court came down heavily upon the Income Tax Department for reopening of the assessments of the tax payers, in a casual manner and without complying with mandatory conditions of law. Thus, in our considered view, this issue is squarely covered in favour of the assessee by the judgments of the Hon’ble jurisdictional High Court and Hon’ble Supreme Court of India, and therefore, reopening is held to be invalid on this ground as well.
Accordingly appeal of the assessee allowed.
Direct link to download the full text of the above judgment –
CA Deepak Aggarwal
Posts
0 comments