Case Law Details
DCIT Vs Santha Build Tech India Pvt. Ltd. (ITAT Chennai)
ITAT Chennai held that reopening after expiry of 4 years, without establishing any failure on part of the assessee to disclose any material facts necessary for its assessment, is bad-in-law and liable to be quashed.
Facts- The assessee is engaged in the business of construction of residential buildings. The assessee’s case was selected for scrutiny assessment and the assessment was completed u/s. 143(3) of the Act vide order dated 31.03.2016. Subsequently, assessment framed was reopened u/s.147 of the Act by issuing notice u/s.148 of the Act dated 04.09.2019. AO recorded reason for issuing notice u/s.148 of the Act that the assessee has not deducted TDS u/s.194A of the Act on interest payment made by the assessee to the extent of Rs.1,43,15,144/- to Reliance Home Finance Pvt. Ltd. Consequently, the AO completed reassessment and passed order u/s.143(3) r.w.s. 147 of the Act dated 27.09.2021.
CIT(A) held that assessment reopened u/s. 147 r.w.s 148 of the Act is bad in law. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that as the AO has not recorded in its reasons for reopening of assessment that there is any failure on the part of the assessee to disclose any material fact necessary for completion of assessment in the relevant assessment year, despite the fact that original assessment was completed u/s.143(3) of the Act and time period of 4 years has expired from the end of the assessment year before reopening of assessment u/s.147 r.w.s. 148 of the Act, we find no infirmity in the order of CIT(A) quashing the reopening.
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 any material facts necessary for its assessment, the reopening in present case is bad in law. Hence, we find no infirmity in the order of CIT(A) and the same is confirmed. Since, we have confirmed the order of CIT(A) quashing the re-assessment on reopening, we need not to adjudicate the issues on Therefore, the appeal of the Revenue is dismissed.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by the Revenue is arising out of the order of the Commissioner of Income Tax (Appeals)-18, Chennai in ITA No.312/2021-22/CIT(A)-18 dated 15.02.2023. The impugned reassessment was framed by the Assistant Commissioner of Income Tax, Central Circle-3(1), Chennai for the assessment year 2013-14 u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 27.09.2021.
2. The only issue in this appeal of Revenue is as regards to the order of CIT(A) quashing the reopening of assessment, reopened u/s.148 of the Act, by the AO. For this, Revenue has raised following ground 2 & 2.1:-
2. The Ld. CIT(A) erred in law in holding that re-opening u/s. 148 is not valid without appreciating that there is escapement of income from assessment, within the meaning of the provisions of Explanation 2(c)(i) to section 147 of the IT Act, since in the assessment order framed, income chargeable to tax has been under assessed, and the same shall amount to escapement of income.
2.1 The learned CIT(A) erred in quashing the reassessment proceedings , on the finding that the assessee had truly disclosed all material facts before the AO without appreciating the fact that the assessee had not disclosed the non deduction of TDS on interest payments in the column 26 (1) (1) of the 3CD report, thereby the assessee cannot be said to have disclosed all material facts in the ROI during the assessment proceedings, and further no opinion was formed by the AO on this issue.
3. Brief facts are that the assessee is engaged in the business of construction of residential buildings. The assessee for the relevant assessment year 2013-14 filed its return of income on 27.03.2015 and subsequently, assessee’s case was selected for scrutiny assessment and assessment was completed u/s.143(3) of the Act vide order dated 31.03.2016. Subsequently, assessment framed was reopened u/s.147 of the Act by issuing notice u/s.148 of the Act dated 04.09.2019. In response to this notice u/s.148 of the Act, assessee filed its return of income on 19.09.2019. The AO recorded reason for issuing notice u/s.148 of the Act that the assessee has not deducted TDS u/s.194A of the Act on interest payment made by the assessee to the extent of Rs.1,43,15,144/- to Reliance Home Finance Pvt. Ltd. Consequently, the AO completed reassessment and passed order u/s.143(3) r.w.s. 147 of the Act dated 27.09.2021. Aggrieved against the reassessment order, assessee preferred appeal before CIT(A).
4. The CIT(A) after considering the submissions of the assessee quashed the reopening by holding that the completed assessment was reopened after expiry of four years and there is nothing coming out of the reason that there is a failure on the part of the assessee to disclose any material fact necessary for completion of its assessment for the relevant assessment year. Hence, assessment reopened u/s.147 w.s. 148 of the Act is bad in law and accordingly, quashed the reassessment by observing in para 7.1.3 as under:-
7.1.3 I have considered the submissions of the appellant and the reasons given by the AO. It is an admitted fact that an assessment u/s 143(3) was originally completed for the AY 2013-14. This completed assessment was re-opened by issue of notice u/s 148 on 4/9/2019 after expiry of four years from the end of the AY 2013-14. As per the 1st proviso to section 147, assessment already completed u/s 143(3) cannot be re-opened after expiry of four years from the end of the assessment year unless there is a failure on the part of the assessee to disclose any material facts necessary for completion of the assessment. In the appellant’s case, the AO has not established any failure on the part of the assessee to disclose any material facts necessary for completion of the original assessment. The AO has not stated any new material that came on record after the original assessment to reopen the assessment. I therefore feel that the re-opening of the assessment is hit by the 1st proviso to section 147 of the Act and the re-opening of the assessment for the AY 2013-14 is not valid. I therefore cancel the re- assessment made u/s 147 in the appellant’s case for the AY 2013-14 and allow the grounds raised by the appellant.
Aggrieved, now Revenue is in appeal before the Tribunal.
5. We have heard rival contentions and gone through facts and circumstances of the case. We noted that admittedly, the relevant assessment year is 2013-14 and originally assessment was completed by the AO u/s.143(3) of the Act vide order dated 03.2016. The AO in the present proceedings i.e., reassessment proceedings were reopened by issuance of notice u/s.148 of the Act dated 04.09.2019. Admittedly, the reopening is beyond 4 years and assessee’s case squarely falls under the proviso to section 147 of the Act. It is also seen that the reopening is done only on the basis that the assessee has not deducted TDS on interest payment made to Reliance Home Finance Pvt. Ltd., amounting to Rs.1,43,15,144/-. The assessee has declared this interest payment and claimed in the return of income as deduction, which was allowed by the AO while framing assessment u/s.143(3) of the Act. We noted that as the AO has not recorded in its reasons for reopening of assessment that there is any failure on the part of the assessee to disclose any material fact necessary for completion of assessment in the relevant assessment year, despite the fact that original assessment was completed u/s.143(3) of the Act and time period of 4 years has expired from the end of the assessment year before reopening of assessment u/s.147 r.w.s. 148 of the Act, we find no infirmity in the order of CIT(A) quashing the reopening. We also noted that this issue is squarely covered by the decision of Hon’ble Supreme Court in the case of CIT vs. Foramer France, (2003) 264 ITR 566, wherein the Supreme Court has affirmed the decision of Hon’ble Allahabad High Court in the case of Foramer France vs. CIT, (2001) 247 ITR 436 by observing as under:-
14. Having heard learned counsel for the parties, we are of the view that these petitions deserve to be allowed.
15. It may be mentioned that a new Section substituted Section 147 of the Income-tax Act by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, The relevant part of the new Section 147 is as follows :
“147. If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this Section and in sections 148 to 153 referred to as the relevant assessment year) :
Provided that where an assessment under Sub-section (3) of Section 143 or this Section has been made for the relevant assessment year, no action shall be taken under this Section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year.”
16. This new Section has made a radical departure from the original Section 147 inasmuch as clauses (a) and (b) of the original Section 147 have been deleted and a new proviso added to Section 147.
17. In Rakesh Aggarwal v. Asst. CIT (1997] 225 ITR 496, the Delhi High Court held that in view of the proviso to Section 147 notice for reassessment under Section 147/148 should only be issued in accordance with the new Section 147, and where the original assessment had been made under Section 143(3) then in view of the proviso to Section 147, the notice under section 148 would be illegal if issued more than four years after the end of the relevant assessment year. The same view was taken by the Gujarat High Court in Shree Tharad Jain Yuvak Mandal ITO [2000] 242 ITR 612.
18. In our opinion, we have to see the law prevailing on the date of issue of the notice under Section 148, i.e., November 20, 1998. Admittedly, by that date, the new Section 147 has come into force and, hence, in our opinion, it is the new Section 147 which will apply to the facts of the present case. In the present case, there was admittedly no failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment. Hence, the proviso to the new Section 147 squarely applies, and the impugned notices were barred by limitation mentioned in the ”
5.1 In view of above facts and circumstances, we are of the view 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 any material facts necessary for its assessment, the reopening in present case is bad in law. Hence, we find no infirmity in the order of CIT(A) and the same is confirmed. Since, we have confirmed the order of CIT(A) quashing the re-assessment on reopening, we need not to adjudicate the issues on Therefore, the appeal of the Revenue is dismissed.
6. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 8th November, 2023 at Chennai.
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