prpri Reopening invalid if no mention of failure on the part of assessee in reasons recorded Reopening invalid if no mention of failure on the part of assessee in reasons recorded

Case Law Details

Case Name : Soul Jewels Vs DCIT (ITAT Mumbai)
Appeal Number : ITA No. 6105/Mum/2018
Date of Judgement/Order : 11/06/2021
Related Assessment Year : 2007-08

Soul Jewels Vs DCIT (ITAT Mumbai)

We find that assessee is a partnership firm engaged in the business of trading in diamonds. The original assessment was completed for the A.Y.2007-08 u/s.143(3) r.w.s. 153A of the Act determining the total income at Rs.56,34,520/- vide order dated 27/12/2011. This assessment was sought to be reopened by issue of notice u/s.148 of the Act on 29/03/2014 which was served on the assessee on the same day. In response to the said notice, the assessee already had filed written reply on 16/04/2014 stating that the return of income already filed on 15/10/2010 may be treated as a return filed in response to notice u/s.148 of the Act. The assessee sought for the reasons recorded by the ld. AO for reopening of assessment which was duly furnished to the assessee. The complete extract of the reasons are reproduced in pages 2,3 & 4 of the assessment order. From the perusal of the said reasons, we find that there is absolutely no mention by the ld. AO in the said reasons recorded about the failure on the part of the assessee to fully and truly disclose material facts that are relevant for the purpose of assessment. Admittedly, the reopening of assessment for the A.Y.2007-08 was made in the instant case beyond four years from the end of the relevant assessment year which triggers applicability of proviso to Section 147 of the Act. The said proviso categorically states that the ld. AO should bring on record the failure committed by the assessee in not disclosing fully and truly all material facts that are relevant for the purpose of assessment in the original assessment proceedings, before resorting to reopening of the case of the assessee. The ld. AR also placed on record the decision of the Hon’ble Jurisdictional High Court in the case of Hindustan Lever Ltd. Vs. R.B. Wadkar reported in 268 ITR 332 (Bom).

Respectfully following the aforesaid decision of Hon’ble Jurisdictional High Court and in view of the fact that failure on the part of the assessee in terms of proviso to Section 147 of the Act was not mentioned in the reasons recorded by the ld. AO, we have no hesitation in quashing the entire re-assessment proceedings as void ab initio. Since the relief is granted to the assessee on the preliminary ground of invalid assumption of jusridiction u/s.147 of the Act, we refrain to give our opinion on the grounds raised on merits and the same are left open.

FULL TEXT OF THE ITAT JUDGEMENT

This appeal in ITA No.6105/Mum/2018 for A.Y.2007-08 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-47, Mumbai in appeal No.CIT(A)-47/AP-47/15-16 dated 10/08/2018 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 20/03/2015 by the ld. Dy. Commissioner of Income Tax, Central Circle 1(1), Mumbai (hereinafter referred to as ld. AO).

2. Though the assessee has raised several grounds of appeal before us both on merits as well as challenging the validity of reopening, it would be pertinent to address the preliminary issue of challenging the validity of assumption of jurisdiction u/s.147 of the Act.

3. We have heard rival submissions and perused the materials available on record. We find that assessee is a partnership firm engaged in the business of trading in diamonds. The original assessment was completed for the A.Y.2007-08 u/s.143(3) r.w.s. 153A of the Act determining the total income at Rs.56,34,520/- vide order dated 27/12/2011. This assessment was sought to be reopened by issue of notice u/s.148 of the Act on 29/03/2014 which was served on the assessee on the same day. In response to the said notice, the assessee already had filed written reply on 16/04/2014 stating that the return of income already filed on 15/10/2010 may be treated as a return filed in response to notice u/s.148 of the Act. The assessee sought for the reasons recorded by the ld. AO for reopening of assessment which was duly furnished to the assessee. The complete extract of the reasons are reproduced in pages 2,3 & 4 of the assessment order. From the perusal of the said reasons, we find that there is absolutely no mention by the ld. AO in the said reasons recorded about the failure on the part of the assessee to fully and truly disclose material facts that are relevant for the purpose of assessment. Admittedly, the reopening of assessment for the A.Y.2007-08 was made in the instant case beyond four years from the end of the relevant assessment year which triggers applicability of proviso to Section 147 of the Act. The said proviso categorically states that the ld. AO should bring on record the failure committed by the assessee in not disclosing fully and truly all material facts that are relevant for the purpose of assessment in the original assessment proceedings, before resorting to reopening of the case of the assessee. The ld. AR also placed on record the decision of the Hon’ble Jurisdictional High Court in the case of Hindustan Lever Ltd. Vs. R.B. Wadkar reported in 268 ITR 332 (Bom). We have gone through the said judgment and the relevant operative portion of the said order is reproduced hereunder:-

20. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced.

3.1. Respectfully following the aforesaid decision of Hon’ble Jurisdictional High Court and in view of the fact that failure on the part of the assessee in terms of proviso to Section 147 of the Act was not mentioned in the reasons recorded by the ld. AO, we have no hesitation in quashing the entire re-assessment proceedings as void ab initio. Since the relief is granted to the assessee on the preliminary ground of invalid assumption of jusridiction u/s.147 of the Act, we refrain to give our opinion on the grounds raised on merits and the same are left open.

4. In the result, appeal of the assessee is allowed.

Order pronounced on 11/06/2021 by way of proper mentioning in the notice board.

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