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Facts
The assessee's income tax assessment for AY 2013-14 was reopened by the AO u/s 147/148 after a scrutiny assessment u/s 143(3) had been completed and more than four years had elapsed. The reopening was based on information alleging suppressed sales of broken rice and under-declaration of income totaling Rs. 29,63,783/-.
Held
The Tribunal held that the reopening of assessment was invalid. Since the notice u/s 148 was issued after four years from the relevant assessment year and the original assessment was a scrutiny assessment, reopening was permissible only if income escaped assessment due to the assessee's failure to disclose material facts fully and truly. The Tribunal found that the AO merely re-appreciated facts already on record, amounting to a change of opinion, which is not a valid ground for reopening after the expiry of four years.
Key Issues
Whether the reopening of assessment u/s 147/148 was valid when initiated after four years of a scrutiny assessment without fresh material indicating failure to disclose material facts.
Sections Cited
Section 147, Section 148, Section 143(3)
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Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI MANOJ KUMAR AGGARWAL
The assessee is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 15.05.2025 passed for assessment year 2013-14.
2. The assessee has taken five grounds of appeal, however, its grievance revolves around two issues, namely; A.Y.2013-14 2 a) The ld.CIT (Appeals) has erred in upholding the re-opening of assessment, b) The ld.CIT (Appeals) has erred in upholding the addition of Rs.26,96,400/- and Rs.2,67,383/- which were added by the AO on account of suppressed sales of broken rice and difference in sale price.
2. We first take Ground Nos. 1 and 2 wherein assessee has challenged re-opening of assessment. The ld. counsel for the assessee while impugning the order of Revenue Authorities submitted that assessee has filed its return of income on 30.09.2013 declaring an income of Rs.23,36,341/-. A scrutiny assessment u/s 143(3) passed on 29.01.2016 whereby income of the assessee has been determined at Rs.23,92,340/-. In other words, a GP addition of Rs.56,000/- has been made to the total income of the assessee. The AO, thereafter, recorded reasons which are available on page No. 21 & 22 of the Paper Book and reopened the assessment. He took us through the reasons and submitted that notice u/s 148 of the Act has been issued on 30.03.2021. Taking us through the reasons, he pointed out that this notice u/s 148 has been issued after expiry of four years from the relevant assessment year. The A.Y.2013-14 3 assessee is protected by the 1st proviso appended to Section 147, as was applicable at that point of time because in this case, originally, scrutiny assessment has been made and a notice after expiry of four years could only be issued if income has escaped assessment on account of failure of the assessee to disclose all material facts fully and truly. In support of his contention, he relied upon a large number of decisions, namely, Duli Chand Singhania Vs ACIT 269 ITR 192 (P&H) and NDTV Vs DCIT 424 ITR 607 (S.C.), Parashuram Pottery Works Co. Ltd. v. Income Tax Officer 106 ITR 1.
3. The ld. DR, on the other hand relied upon the orders of Revenue Authorities and submitted that AO got an information that assessee has not disclosed the sale of broken rice which was a bye-product during hulling the rice. Hence, AO has rightly reopened the assessment.
We have duly considered the rival contentions and gone through the record carefully. The reasons recorded by the AO read as under :
“Reasons for reopening of the assessment in case of M/s Mata Bala Sundri Rice Mills, Sarawan Road, Sadhaura, Yamuna Nagar for the Assessment Year 2013-14 u/s 147 of the Income Tax Act, 1961.
A.Y.2013-14 4 1. The assessee firm filed return of income for the A.Y. 2013-14 on 26.09.2013 declaring income at Rs.23,36,340/-. The assessee firm is a rice seller. Assessment in this case was completed on 29.01.2016 vide order u/s 143(3) at an income of Rs.23,92,340/-.
On perusal of record it was noticed that as per CMR scheme, the paddy procured by FCI is required to be delivered to mills for milling operation and the resultant rice to be delivered to FCI stocking point. After conversion by milling as per norms laid down by Tariff Commissioner, 100 Kg of paddy is expected to produce 67 Kg of raw Rice. During conversion process of paddy, valuable by products such as rice bran, broken rice and paddy husk are generated which have realizable market value. During the financial year 2012-13, assessee firm had milled 29960 Qtl paddy under CMR policy. From the perusal of the assessment records, it is revealed that the yield of by products such as broken rice of 1797.60 qtl (29960X6%) generated out of paddy milled under CMR scheme has not been disclosed in the books of accounts. Thus, the assessee firm has sold broken rice out of books to the tune of Rs.26,96,400/- (Rs. 1500/- per qtl average sale price). Farther, as .per rice nakku account, there was a opening stock of 103.63 qtl. purchase-value" has been disclosed at Rs.350391/-. Thus, average purchase price comes to Rs.33'81.17 per qtl. However, the assessee has sold 71.98 qtl. Nakku rice for Rs.57,656/- with average sale, price per qtl Rs.801/-. Thus, the opening stock of nakku has been or valued to the extent of Rs.2,67,383/- (3381.17- 801=2580.17 X 103.63 qtl). This process has resulted in under statement of gross profit to the extent of Rs.2,67,383/-. Thus, the income of Rs.29,63,783/-(2696400+267383) is considered to be the assessee's unexplained income and escaped from assessment in the hands of the assessee for the A.Y. 2013-14.
In this regard, letter has been written by the then ITO, Ward-2, Yamuna Nagar vide his office letter No. 17906 dated 19.02.2018. In compliance, the assessee furnished written reply on 31.03.2018 but no supporting documents has been furnished. Further, letter has been issued on 30.08.2018 vide dispatch No. 6893. However, the assessee has not made any compliance. 4. 1 have, therefore, reason to believe that income to the extent of Rs.29,63,783/- during the financial year 2012-13 represents his/her unexplained income for the relevant financial year and has escaped from assessment in the hands of the assessee for the Assessment Year 2013-14 and any other income, which subsequently comes to notice has escaped from assessment, within the meaning of section 147, which is liable to tax for the A.Y. 2013-14.
Admittedly notice u/s 148 has been issued after expiry of four years. The interdiction provided in the 1st proviso appended to Section 147, as was applicable in A.Y.2013-14 5 assessment year 2013-14 puts an embargo upon the powers of the AO to issue notice u/s 148 if four years have been expired from the end of the relevant assessment year and original assessment was passed u/s 143(3), then such notice could only be issued if income has escaped assessment on account of failure of the assessee to disclose all material facts fully and truly. The AO has nowhere alleged which income has not been declared by the assessee fully and truly during scrutiny assessment u/s 143(3). If reasons are being perused, then it would reveal that AO has just re-appreciated those very facts and circumstances which were already undergone by the AO. He has not made reference to any item which has been percolated to him after the scrutiny assessment and which can exhibit that assessee has withheld a particular information on account of which it has been underassessed or assessed it too low a rate. Therefore, this re-opening is just based on the change of opinion which is not sustainable in the eyes of law. Accordingly, Ground No. 1 and 2 are allowed and we quash the re-assessment order.
A.Y.2013-14 6 6. Since we have already quashed the re-assessment order, therefore, we do not deem it necessary to deal with other issues on merit.
In the result, appeal of the assessee is allowed.
Order pronounced on 20.02.2026.