INCOME TAX ACT, 12961

Section 147, Proviso

Reassessment - Full and true disclosure - Subsequent enquiry by AO and audit objection whether constitute tangible material -

Original assessment was completed under section 143(3) on 3-12-2010 whereby the AO had accepted the return of income of the assessee. The AO issued notice under section 148 on 31-3-2015 which was clearly after the expiry of 4 years from the end of the assessment year under consideration. The assessee had challenged the validity of reopening of the assessment on the ground that there was no failure on the part of the assessee to disclose fully and truly all materials facts necessary for assessment and consequently the proviso to section 147 was applicable. The assessee also referred to the notice issued by the AO under section 142(1) and reply thereto. During original assessment under section 143(3) no enquiry was made by the AO regarding nature of income arising from arrangement of development of commercial complex after demolition of Cinema Hall building. CIT(A) had decided the issue by presuming the fact that reassessment proceedings were initiated on the basis of re-appreciation of the same set of facts available on record and was nothing but merely change of opinion.Held: Bare reading of the assessment order, dated 3-12-2010 does not reveal that any enquiry was conducted by the assessing officer on the issue of nature of income arising from the arrangement of development of commercial complex after demolition of Cinema Hall Building on the land in question. It was a very brief and cryptic assessment order passed summarily. The said order does not exhibit any thought process of the AO. After scrutiny assessment order passed dated 3-12-2010, there was an audit objection giving elaborate point wise factual details. The Audit party had conducted a thorough enquiry of relevant facts pertaining to the entire exercise of conversion of land use from Cinema Hall Building to Development of commercial complex. The AO had also conducted an enquiry by issuance of notices under section 133(6) dated 1-9-2014 and 25-9-2014 which were not in dispute. Ignoring the relevant facts which were necessary to arrive to the conclusion whether subsequent enquiry and audit objection would constitute a tangible material to form the belief that income assessable to tax had escaped assessment, would render the impugned order of the CIT(A) as not sustainable. In the facts and circumstances of the case, Tribunal set aside this issue to the record of the CIT(A) to re-adjudicate the same after considering the audit objection as well as enquiry conducted by the AO by issuing notices under section 133(6).

REFERRED : Ritu Investments Ltd. v. DCIT (2011) 51 DTR 162 (Del.-HC) : 2011 TaxPub(DT) 0647 (Del-HC), CIT v. Eicher Ltd. (2007) 294 ITR 310 (Del.-HC) : 2007 TaxPub(DT) 1255 (Del-HC), CIT v. Kelvinator India Ltd., (2002) 256 ITR 1 (Del.-HC) : 2002 TaxPub(DT) 1348 (Del-HC), CIT v. Jet Speed Auto (P) Ltd. (2015) 372 ITR 762 (Bom.) : 2015 TaxPub(DT) 1442 (Bom-HC) ansd CIT v. Bhanji Lavji (1972) 79 ITR 582 (SC) : 1971 TaxPub(DT) 315 (SC).

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