M/S. REX ROTARY INDIA PVT. LTD.,CHENNAI vs. DCIT, CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – 3, Chennai, dated 30.06.2016 and pertains to assessment year 2006-07.

Sh. B. Ramakrishnan, the Ld. representative for the assessee, submitted that the first issue arises for consideration is reopening of assessment under Section 147 of the Income-tax Act, 1961 (in short 'the Act'). Referring to the assessment order, more particularly the reasons for reopening of assessment under Section 147 of the Act, the Ld. representative submitted that the Assessing Officer found that in the balance sheet filed along with return of income, interest accrued but not due was disclosed under the head “current assets loans and advances”. The assessee has also claimed this as revenue expenditure. The Ld. representative further submitted that the assessee has filed return of income for the year under consideration on 07.12.2006 and a revised return was also filed on the same day. The assessment order under Section 143(3) of the Act was passed on 08.12.2008. Subsequently, after expiry of four years, the Assessing Officer issued notice under Section 148 of the Act on 15.03.2013 on the ground that the income otherwise assessable to tax escaped assessment. The Ld. representative further submitted that it is not the case of the Assessing Officer that there was any negligence on the part of the assessee in disclosing any part of income for completion of assessment.

Referring to the first proviso to Section 147 of the Act, the Ld. representative for the assessee submitted that when the assessment was completed under Section 143(3) of the Act, after expiry of four years from the end of the relevant assessment year, the Assessing Officer cannot reopen the assessment under Section 147 of the Act unless and until it was found that there was negligence on the part of the assessee in offering the particulars required for completing the assessment. In the case before us, according to the Ld. representative, the assessment was reopened on the basis of balance sheet already filed by the assessee and the material available on record. There was no new material available before the Assessing Officer. In the absence of any new material, the failure of the assessee to furnish the required particulars for completing assessment, it cannot be said that there was negligence on the part of the assessee in furnishing the required particulars.

On the contrary, Shri Durai Pandian, the Ld. Departmental Representative, submitted that admittedly the assessment was completed on 08.12.2008 and the notice was issued for reopening the assessment on 15.03.2013, which is beyond the prescribed time of four years provided under proviso to Section 147 of the Act. The Ld. D.R. has fairly submitted that no fresh material is available on record and only on the basis of balance sheet filed by the assessee along with original return of income, the Assessing Officer found that the assessee exhibited interest accrued but not due under the head “current assets”. The Ld. D.R. has also submitted that the assessee has furnished all the particulars for completing assessment, however, the Assessing Officer subsequently examined the material available on record and found that the interest income accrued to the assessee was not brought to taxation. Therefore, according to the Ld. D.R., the Assessing Officer found that there was escapement of income from assessment, hence, he issued notice for assessing the income escaped from assessment.

We have considered the rival submissions on either side and perused the relevant material available on record. We have also gone through the provisions of Sections 147 and 148 of the Act.

Now coming to material facts, the assessee has filed the balance sheet along with the return filed on 07.12.2006. The assessee has disclosed all the income accrued to it and also certain items of income shown in the balance sheet were claimed as revenue expenditure. When the assessee has disclosed all the particulars, including the interest accrued, but not due, it is for the Assessing Officer to examine the same and found out whether any income assessable to tax was claimed as revenue expenditure. The Assessing Officer after examining the material found on record, including the balance sheet, accepted the claim of the assessee under Section 143(3) of the Act by an order dated 08.12.2008. After passing the assessment order, there was no fresh material available on record for reopening the assessment. It is also not the case of the Revenue that the assessee has not disclosed any material facts for completing the assessment. In view of the above, it is obvious that the assessee has furnished all the particulars required for completing the assessment. Therefore, there was no negligence on the part of the assessee in furnishing required particulars. In those factual situation, this Tribunal is of the considered opinion that the reopening of assessment, after expiry of four years from the end of the relevant assessment year, is not justified.

Apart from that, the Assessing Officer on the basis of vary same balance sheet, allowed the claim of the assessee. Therefore, taking a different view after reopening would amount to change of opinion. In view of the above, we are unable to uphold the reopening of assessment after expiry of four years. Accordingly, we hold that the reopening of assessment after expiry of four years is barred by limitation. Hence, consequential order passed by the Assessing Officer cannot stand in the eye of law. Accordingly, the orders of the authorities below are set aside and the addition made by the Assessing Officer is deleted.

In the result, the appeal filed by the assessee is allowed.