Reopening Income Tax Assessment: The Income Tax Assessment Officer cannot send a notice to the assessee for re-opening of the Assessment, four years after it has been filed, unless it is proven that the assessee failed to truly disclose all facts necessary for the assessment, according to a recent decision of Pune Bench of Income Tax Appellate Tribunal (ITAT). The tribunal’s decision came in the case of one Hari Krishan, who was issued notice under Section 148 of the Act in 2015, over four years after he had filed his ITR for AY 2009-10.
The tribunal observed that the law on re-opening of an assessment under the Income Tax Act is “fairly settled”. It said:
- The Assessing Officer can re-open an assessment only in accordance with the express provisions provided in Section 147/148 of the Act.
- It is only on the Assessing Officer strictly satisfying the provisions of Section 147 of the Act that he acquires jurisdiction to re-open an assessment.
- Section 147 of the Act, clothes the Assessing Officer with jurisdiction to reopen an assessment on satisfaction of the following:
(a) The Assessing Officer must have reason to believe that
(b) Income chargeable to tax has escaped the assessment and
(c) In cases where the assessment sought to be reopened is beyond the period of four years from the end of the relevant assessment year, then an additional condition is to be satisfied viz: there must be failure on the part of the Assessee to fully and truly disclose all material facts necessary for assessment.
The tribunal also cited a Gujarat High Court observation in Inductotherm (India) P. Ltd. Vs. M. Gopalan (2013). The HC had observed that “for a mere verification of the claim, the power of reopening of the assessment could not be exercised and it further observed that AO under the guise of power to re-open the assessment cannot seek to undertake a fishing or roving inquiry or seek to verify the claim as if he is the scrutiny officer.”
The tribunal found that there was no allegation against the assessee that he had failed to disclose any material facts because of which any income chargeable to tax escaped the assessment. Also, there was no failure on the part of the assessee to disclose “truly and fully all material facts necessary for assessment.”
The tribunal hence concluded: “…notice for re-opening of the assessment u/s 147 of the Act is not as per the mandate of Sec.147 of the Act and therefore the re-opening is not permissible. I am therefore of the view that the notice issued for reopening has to be set aside and the same deserves to be quashed.”
Hari Krishan had argued before the Tribunal: “The reassessment proceedings initiated by issuing notice u/s 148 of the Act are ab-initio void, invalid and unsustainable in law. The Assessing Officer has reopened the assessment merely for verification of transactions of credits in the bank accounts of the assessee. The reassessment proceedings cannot be initiated for verification. In the reasons recorded for reopening the assessment, the Assessing Officer has not mentioned as to what income that was chargeable to tax has escaped assessment and what is the basis for that.”
Before making an assessment under Section 147, the assessing officer has to serve a notice for furnishing details to the assessee under Section 148 of the Income Tax Act. However, there are certain conditions that need to be followed before sending the notice.