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Income Tax Appellate Tribunal, “L” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI MANOJ KUMAR AGGARWAL, AM
O R D E R PER MANOJ KUMAR AGGARWAL (AM) : 1. The instant appeal has been filed by the assessee for A.Y. 1997-1998 assailing the order of Commissioner of Income Tax (Appeals)-31[in short ‘CIT’], Mumbai order dated 01/03/2005 arising out of Assessing Officer’s [AO] order dated 17/03/2004 passed u/s. 143(3) read with Section 147 of the Income Tax Act, 1961. By way of this appeal, the assessee has challenged the reopening / reassessment on technical grounds as well as on merits.
Facts in brief, are that the assessee is engaged in banking business and filed original return of income for A.Y. 1997-1998 during November, 1997 which was processed u/s. 143(3).
Subsequently, the assessment was sought to be reopened under Section 147 of the Act vide AO’s letter dated 13/02/2003 on the following grounds:-
“It is a case of under assessment of income. In this case, the department has worked out profit u/s. 115JA at Rs. 1531.15 lacs whereas the profit to be worked out u/s. 115JA at Rs. 3599.95 lacs should have been as under:- Book profit as per annual account (adopted by the Department) Rs. 432233000 (+) Interest tax provision Rs. 105000000 Provision for bad debts Rs. 538407000 Provision of IT/WT Rs. 122492928 Donation Rs. 1852000 Rs. 1199984928 30% Rs. 359995478 There was under assessment of income of Rs. 206880478”.
The assessee objected to reopening on the ground that that it is bad in law as original return is processed under Section 143(3) and reopening is beyond four years from end of relevant assessment years whereas there has been no failure on the part of the assessee to disclose fully and truly material facts necessary for assessment as per provision to section 147. But the same was rejected by the AO and reassessment was completed vide AO’s order dated 17/03/2004.
The assessee preferred first appeal before CIT(A) and assailed the reassessment on technical grounds as well as on merit but the same was dismissed vide CIT order dated 01/03/2005. Aggrieved, the assessee is in appeal before us.
At the outset, the Learned Authorized Representative [AR] of the assessee has challenged the reopening on technical grounds and contended that no new tangible material has come to the possession of the AO so as to justify the reopening. The reopening is being sought merely to rectify the computations and therefore, the reassessment is bad-in-law as per the statutory provisions. The re-assessment proceedings are beyond four years from the expiry of relevant assessment year and the original return has been processed u/s. 143(3). There was no failure on the part of the assessee to fully and truly disclose the material facts necessary for the purpose of assessment. The AO has no power to review and mere computational errors cannot be rectified by resorting to Section 147. The relevant information, as called for at the time of original assessment was duly supplied and all material was available before the AO. Moreover, In the original assessment order, the AO himself has computed profits and gains of business and added back impugned items and thus, these were completely within the knowledge of AO and AO has applied his mind in all the aspects during the original assessment proceedings itself. The Learned Departmental representative, on the other hand, has justified the re-opening and supported the action of the lower authorities.
We have heard the rival contentions and perused the material on record. The assessment year in question is 1997-98. The original assessment was completed u/s. 143(3) and reopening notice has been issued u/s. 147 on 13/02/2003 which is clearly beyond four years from the end of relevant assessment year. First of all, it would be prudent to reproduce the relevant portion of Section 147 which is as follows:-
“Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year”.
Therefore, Section 147 provides that when an assessment is completed u/s 143 (3) of the Act then it can be reopened beyond four years from the end of the relevant assessment year, only upon satisfaction of either of following conditions: - (i) failure on the part of assessee to file the prescribed return; or (ii) failure of assessee to disclose full and truly all material facts necessary for the assessment.
The assessment is sought to be reopened by the AO mainly on the ground that book profit could not be calculated properly and few items have escaped to be added to book profit. This is nothing more than computational error and there is no new tangible material in his hand so as to justify reopening and also, there is failure on the part of assessee in any manner as AO himself has added back these items in original assessment order and was fully aware of the same. The important ingredient of re-opening that there should be the failure on the part of the assessee to disclose truly and fully all material facts necessary for the purpose of assessment, is missing.
The Hon’ble apex Court in the case of CIT vs. Foramer France (2003) 264 ITR 566 (SC) has clearly laid down the principle that where there is no failure on the part of the assessee to disclose material facts, the reassessment proceedings after the expiry of four years is not possible in view of the provisions of Sec. 147 of the Act. In the circumstances of the case and after appreciating the statutory provisions and judicial pronouncements, we conclude that reassessment proceedings are bad in law and the same are set aside. Accordingly, the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 24th August, 2016.