Gokaldas Exports Vs DCIT (ITAT Bangalore)
ITAT Bangalore held that reopening beyond the period of 4 years of completion of assessment u/s 143(3) without allegation regarding non-disclosure of full and true material facts is bad-in-law.
Facts- The case was selected for scrutiny and statutory notices were issued to the assessee. In response to the notice assessee filed details. After considering the submissions of the assessee the Assessing Officer (AO) passed order under Section 143(3) of the Act on 15.03.1998. The case was reopened under Section 147/148 of the Act by issuing notice dated 30.07.2001 after recording reasons.
In pursuant to the notice issued u/s. 148 of the Act the assessee filed ROI. The assessee filed revised return of income declaring Nil income. Thereafter the AO issued other statutory notices and he observed that the transfer of capital assets to the partners would amount to transfer of capital assets which would attract capital gain u/s 45(4) of the Act. The assessee filed reply and after considering the documents filed before the AO he passed the order.
Conclusion- Held that there is no allegation upon the assessee regarding not disclosing fully and truly all material facts for completion of assessment which is necessary in the case of reopening beyond the period of 4 years in the case of assessment completed u/s 143(3) of the Act. Since the case relates to AY 1995-96 and the notice has been issued by the AO on 30.07.2001, we observe from the notice that necessary ingredients, which were required to be mentioned for reopening beyond the period of 4 years has not been mentioned. Accordingly we uphold that the reasons recorded by the AO for exercising jurisdiction u/s. 147 is not in conformity with the provisions of Section 147 of the Act. Accordingly we uphold that the order passed by the AO is bad in law for want of fulfilling the necessary ingredients for exercising jurisdiction under Sections 147/148 of the Act.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal by the assessee is directed against the order of the CIT(A)-1, Bangalore dated 31.03.2004 for AY 1995-06. This is the third round of proceedings before the Tribunal in pursuant of the judgement of the Hon’ble Jurisdictional High Court in ITA No. 635 of 2016 order dated 19.07.2022 which is placed on record on pages 164 to 176 of the paper book.
2. The assessee filed additional grounds before the Tribunal on 27.03.2023 challenging legal as well as other issues as under: –
“1. The notice issued under section 148 of the Act is invalid in law without obtaining the sanction as per provisions of section 151(1) of the Act on the facts and circumstances of the case.
2. The mandatory conditions to assume jurisdiction under section 147 of the Act does not exist for issue of notice under section 148 of the Act on the facts and circumstances of the case.
3. The reasons recorded for issue of notice under section 148 of the Act without making any allegation that the appellant has failed to disclose fully and truly all material facts necessary for the assessment as per proviso to section 147 of the Act makes the proceedings of issue of notice under section 148 of the Act is bad in law and without jurisdiction on the facts and circumstances of the case.
4. The assessment reopened under section 148 of the Act based on the audit objection is invalid in law on the facts and circumstances of the case.
5. The notice issued under section 148 of the Act and order passed under section 143(3) r.w.s 147 of the Act in the name of the partnership firm which was not in existence is invalid in law on the facts and circumstances of the case.
6. Without prejudice whether any capital gains arises when the assets have been transferred at book value and consequently no capital gain is computable on the facts and circumstances of the case.
7. Without prejudice the authorities below were not justified in assessing the firm after it has ceased to exist on the facts and circumstances of the case.
8. The value adopted by the Assessing officer is not correct on the facts and circumstances of the case.
9. The appellant craves leave of this Hon’ble Tribunal, to add, alter, delete, amend or substitute any or all of the above grounds of appeal as may be necessary at the time of hearing.
10. For these and other grounds that may be urged at the time of hearing of appeal, the appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and ”
3. The brief facts of the case are that the assessee company, engaged in the business of garment exports, filed return of income for the impugned assessment year on 31.10.1995 declaring total income of Rs.73,45,020/- which was processed under Section 143(1) of the Income Tax Act, 1961 (the Act). The case was selected for scrutiny and statutory notices were issued to the assessee. In response to the notice assessee filed details. After considering the submissions of the assessee the Assessing Officer (AO) passed order under Section 143(3) of the Act on 15.03.1998. The case was reopened under Section 147/148 of the Act by issuing notice dated 30.07.2001 after recording reasons. The reasons recorded by the AO ( typed copy) reads as under: –
“30.7.2001: For the Asst Year 1995-96 the assessee filed its return on 31.10.95 returning income of Rs. 73,45,020/-. The said return was processed on 29.3.96 u/s 143(1)(a) determining the income at Rs. 76,06,706/-. Order u/s 143(3) was passed on 16.3.98 enhancing the income to Rs. 1,71,63,064/-.
It is seen that the assessee has reduced an amount of Rs. 12,46,895/- from land value as per depreciation schedule. The following landed properties are purportedly deleted from the said schedule:
