B.SURESH KUMAR,CHENNAI vs. ITO CORP. WARD 3(4), CHENNAI

The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-7, Chennai in dated 25.01.2019 for assessment year 2009- 10.

Shri. B. Suresh Kumar, the assessee, director of M/s. S&S Enterprises is engaging in providing end to end liaison service to various multinational companies and corporate clients engaged in power sector.

The Ld. AR submitted that the primary issue in this case is validity of reopening the assessment. The assessee’s assessment u/s. 143(3) was completed on 29.06.2011, after examining party wise services charged offered in the P&L account, other material and after considered giving credit for the TDS certificates etc. After the expiry of 4 years from the end of the assessment year 2009-10, the AO issued a notice u/s. 148 dated 25.01.2016. In such case, in accordance with first proviso to section 147, the officer should have recorded the reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment in that assessment year. In this case, there is no fresh material and there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Therefore, the reassessment made is not valid and is not in accordance with law. The Ld. CIT(A) erred in upholding the reassessment by simply observing that as per CBDT instruction No. 9/06 dated 07.11.2006, remedial action has to be mandatorily taken where the Revenue Audit party raised an objection, without following and applying the law on this aspect. Per contra, the Ld. DR supported the orders of the lower authorities.

We heard the rival submissions and find merit in the submissions made by the Ld. AR. The assessment for the assessment year 1989-90 was completed u/s. 143(3) on 29.06.2011. In such case, after the expiry of 4 years from the end of the relevant assessment year, the AO can proceed to reassess the income only when he records the reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment in that assessment year. In this case, the material on which the Assessing Officer reopened were filed by the assessee was very well considered by the AO. Therefore, the notice issued u/s. 147 does not satisfy the legal condition laid in first proviso to section 147 of the Act and hence, we find merit in the submissions of the assessee and allow the assessee’s appeal.

In the result, the assessee’s appeal is allowed.