INCOME TAX ACT, 1961

Section 147, First proviso Section 148 Section 132

Reassessment - Full and true disclosure - Reason to believe - Notice under section 148 issued after expiry of four years

Case of the assessee was reopened after the expiry of four years, vide notice under section 148, dated 31-3-2016. AO vide Letter, dated 19-8-2016 supplied the reasons recorded for reopening of the assessment. Drawing attention to the recorded reasons, the AR submitted that the recorded reasons proceeded on the basis of the information contained in the appraisal report prepared by Investigation Directorate, Ahmedabad in relation to the survey conducted under section 133A on 18-12-2014 in the case of Commodity Traders Group [third party]. AR pointed out that when the appraisal report which was the foundation on which the AO had based his reasons recorded was received by him only on 5-4-2016, then he (AR) wondered as to how the AO in the first place was able to record in his 'reasons recorded' about the contents of the appraisal report from Ahmedabad which event was prior to issue of notice under section 148 on 31-3-2016. Therefore, AR contended that since AO had issued notice under section 148 on 31-3-2016 without there being any material available to him on the basis of which he could have reasonably formed a belief that assessee's income had escaped assessment, the very initiation of proceedings under section 148 was bad in law and, therefore, consequent order under section 147/143(3) was null in the eyes of law and deserve to be quashed. According to the AR, in the present case, all the relevant information and details concerning the assessee's trading in commodities on the NMCE were made available at the time of original assessment and therefore, it was not a case that the assessee had failed to disclose truly and fully all material facts necessary for assessment for that year and in that view of the matter, the AO could not have validly reopened the assessment for assessment year 2009-10 after the expiry of four years. Held: Following the law laid down by the Supreme Court in the case of NDTV Ltd. v. Dy. CIT, the initiation of reassessment proceedings was bad in law as it did not satisfy the condition precedent in the first proviso to section 147. There was merit in the alternate contention made by the AR that the notice under section 148 was issued on 31-3-2016 without first forming reasons to believe that income chargeable to tax had escaped assessment. As noted in the recorded reasons, the very premise of the AO for reopening the assessment for assessment year 2009-10 was the appraisal report of the search and survey cases of Commodity Traders Group of Ahmedabad. This Tribunal was inclined to uphold the contention of the AR that the foundation on which the AO based his belief that income chargeable to tax had escaped assessment was absent at the material time when he issued notice under section 148 on 31- 3-2016, and therefore, the basic legal requirement of reopening under section 148, i.e., AO's formation of reasons to believe escapement of income prior to reopening of assessment was absent in the given facts of the present case. AO did not comply with the requirement of law set out in section 147/148 before reopening the assessment for assessment year 2009-10 originally completed under section 153A/143(3) dated 31-3-2015, and as a consequence thereto Order, dated 29-12-2016 passed by the AO being without jurisdiction is held to be a nullity in the eyes of law. Assessee, therefore, succeeded on this legal issue. The cross-objections taken by the assessee for assessment year 2009-10 was, thus, allowed.

Followed:New Delhi Television Ltd. [NDTV] v. DCIT (2020) 116 taxmann.com 151 (SC) : 2020 TaxPub(DT) 1703 (SC). Relied:<./i>Calcutta Discount Co. Ltd. (1961) 41 ITR 191 (SC) : 1961 TaxPub(DT) 130 (SC), Ganga Saran & Sons Pvt. Ltd. v. ITO (1981) 130 ITR 1 (SC) : 1981 TaxPub(DT) 952 (SC), Hindustan Lever Ltd. v. R.B. Wadkar (2004) 268 ITR 332 (Bom-HC) : 2004 TaxPub(DT) 1424 (Bom-HC) and (002) 258 ITR 317 (Del) : 2002 TaxPub(DT0 1670 (Del-HC) : 253 ITR 86.