Reopening based on incorrect fact understanding is unsustainable: ITAT Mumbai

Indian Hotels Company Limited Vs ACIT (ITAT Mumbai)

ITAT Mumbai held that the very basis of which the Assessing Officer formed the belief that the income liable to tax is escaped assessment was based upon incorrect understanding of the facts and is, therefore, not sustainable in the eyes of law.

Facts- The present appeal has been preferred by the assessee mainly contesting that the reason recorded by the Assessing Officer were not in compliance with the First Proviso to Section 147 of the Act. In the present case assessment was framed on the Assessee under Section 143(3) of the Act. Thereafter, the reassessment proceedings were again initiated under Section 147 of the Act for the Assessment Year 1998­1999 after the expiry of 4 years from the end of the relevant assessment year. The Assessing Officer was under obligation to give a categorical finding or averment in the reasons recorded for reopening the assessment that income had escaped assessment on account of failure of Assessee to disclose fully and truly all material facts necessary for framing assessment. Since the reasons recorded failed to do so, the reasons recorded were bad in law and therefore, liable to be quashed. Further, the notices/report on the basis of which re-assessment proceedings were initiated were already with the Assessing Officer prior to the completion of re-assessment proceedings under Section 143(3) read with Section 147 of the Act on 25/03/2004 and therefore, there was no new tangible material to initiate reassessment proceedings.