Crown Real Estate Pvt Ltd Vs ITO (ITAT Chennai)
ITAT Chennai held that reopening of assessment beyond 4 years without any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment is bad in law and hence liable to be quashed.
Facts- The main contention of the appellant is assumption of jurisdiction u/s.148 of the Act by the AO and confirmed by the CIT(A) is against, for the reason that the reopening is beyond 4 years and original assessment was completed u/s.143(3) of the Act vide order dated 15.03.2016 and there is no failure pointed out by the AO in the reasons recorded on the part of the assessee to disclose fully and truly all material facts for completion of assessment for the relevant assessment year.
Conclusion- Held that reopening is beyond 4 years and as the original assessment was framed u/s.143(3) of the Act, the Revenue could not establish any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, the reopening in present case is bad in law. Hence, reopening is quashed and this jurisdictional issue is allowed in favour of assessee.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in order No.ITBA/NFAC/S/250/2022-23/1048970692(1) dated 20.01.2023. The re-assessment was framed by the DCIT, Corporate Circle 1(2), Chennai for the assessment year 2013-14 u/s.144 r.w.s.147 of the Income Tax Act, 1961 (hereinafter ‘the Act’), vide order dated 13.12.2019.
2. The first issue on the assumption of jurisdiction u/s.148 of the Act by the AO and confirmed by the CIT(A) is against, for the reason that the reopening is beyond 4 years and original assessment was completed u/s.143(3) of the Act vide order dated 15.03.2016 and there is no failure pointed out by the AO in the reasons recorded on the part of the assessee to disclose fully and truly all material facts for completion of assessment for the relevant assessment year. For this, assessee has raised following ground No.3 & 4:-
3. The National Faceless Appeal Centre (NFAC) ought to have seen that reopening of assessment beyond 4 years without any additional tangible material to show that income has escaped assessment smacks of lack of jurisdiction. The Notice under section 148 was issued on 29.03.2019 which is beyond 4 years from the end of the assessment year Viz .31.03.2014.
4. The National Faceless Appeal Centre (NFAC) ought to have seen that the assessee has furnished full and true particulars of its income at the time of original assessment with reference to income alleged to have escaped assessment and it is settled position of law that the assessment cannot be validly reopened under Section 147 of the Act, within four year or beyond 4 years, merely on the basis of change of opinion.
3. Briefly stated facts are that the assessee is a resident domestic company and engaged in the business of real estate and aquaculture. The assessee filed its return of income for the relevant assessment year 2013-14 on 01.10.2013 and subsequently the same was revised on 06.02.2014. This return of income was selected for scrutiny under CASS and notice u/s.143(2) of the Act was issued and assessee filed details called for. In view of the details provided by assessee and explanation offered and material filed were considered and assessment was completed u/s.143(3) of the Act originally vide order dated 15.03.2016 by the AO.
3.1 Subsequent to completion of assessment u/s.143(3) of the Act, the AO recorded the reasons u/s.147 of the Act for issuance of notice u/s.148 of the Act and accordingly, notice u/s.148 of the Act dated 20.03.2019 was issued calling for the return of income on the ground that for the assessment year 2013-14, there is escapement of income. The assessee replied that it had already filed return of income u/s.139(1) and same was revised u/s.139(5) of the Act, which was scrutinized vide assessment order passed dated 15.03.2016 u/s.143(3) of the Act, may be considered as return filed in response to notice u/s.148 of the Act. Accordingly, the AO framed the reassessment u/s.144 r.w.s.147 of the Act, vide order dated 30.12.2019. The assessee challenged this re-assessment order before the CIT(A).
4. The assessee raised the first issue before CIT(A) on reopening which reads as under:-
“1. Appellant submits that the Order of Assessment dated 13.12.2019 passed under section 144 r.w.s 147 of the Income Tax Act for the assessment year 2013-14, in so far as it goes against the appellant, is contrary to law and facts, against the weight of evidence and probabilities of the case.”
Now, the ld.counsel for the assessee before us pointed out that the CIT(A) has not adjudicated this jurisdictional issue and just confirmed the addition by adjudicating and treating the only effective grounds as under:-
“6.2. There is only one effective ground of appeal and i.e., pertains the addition of Rs.3,93,01,801/- as unexplained cash credits u/s 68 of the Income-tax Act.”
Now, the ld. counsel for the assessee stated that complete facts relating to the jurisdictional issue i.e., framing of reassessment beyond 4 years and there is no failure pointed out by the AO in the reasons recorded on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the relevant assessment year are available on record and the Tribunal can decide the issue being a jurisdictional issue.
5. First of all, the ld. counsel for the assessee drew our attention to reasons recorded, which reads as under:-
Reasons for reopening of the assessment in the case of M/s. Crown Real Estates Private Limited for the Asst. Year 2013-14 u/s. 147 of the Act.
1. Brief details of the Assessee:
The assessee Company is engaged in the business of real estate.
2. Brief details of information collected/received by the AO:
There had been share application money pending and not shares not allotted. There is an increase of Rs.77,20,610/- when compared to the amount for AY 2012-13. The genuineness and creditworthiness of the persons who subscribed for shares are to be verified. In addition to this it is seen that authorized capital is Rs. 5 lakhs whereas the share application money pending is Rs.4.42,72,411/- Thus there is a violation as far as share application money is concerned when compared to the authorized capital.
3. Analysis of information collected/received:
The above analysis shows that the income exceeding Rs. 1 lakh has escaped assessment there by subjecting the assessee’s case for reopening u/s.148 for the AY 2013-14.
4. Enquiries made by the AO as sequel to information collected/received:
Nil.
5. Findings of the AO:
Share application money brought in has to be verified with proper evidences. The same is also in huge excess than the authorized capital.
6. Basis of forming reason to believe and details of escapement of income: The reason to believe that the income has escaped has already been detailed in para 2 & 5 above.
7. Escapement of income chargeable to tax in relation to any assets (including financial interest in any entity) located outside India.
Nil
8. Applicability of the provisions of Sec.147/ 151 to the facts of the case:
In view of the above, it is requested that necessary sanction may be accorded to issue notice u/s. 148 for the Asst. Year. 2013-14.
The ld.counsel for the assessee subsequently took us through the reassessment order and drew our attention to the following paras:-
Subsequently on analysis of the balance sheet of the assessee it was found that there was increase in share application money received, from Rs.3,65,51,801/- to Rs.4,42,72,411/-. Since the said share application money was standing in the books of the assessee company remaining unallotted, the case of the assessee was reopened u/s. 147 of the IT Act after seeking prior approval. Notice u/s. 148 dated 29.03.2019 was issued and served on assessee. No return of Income has been filed in response to Notice u/s.148 on the 1.T. Act. Further, Notice u/s. 142(1) issued on 19-112019 calling for return of income and intimating change of incumbent.
The details of the parties form whom share application money received, date of receipt & reasons for non-allotment of shares was called for. In response the assessee furnished the party wise breakup of share application money received as under:
