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Facts
The assessee's appeal was against the order of the CIT(A) for AY 2012-13. The Assessing Officer (AO) had issued a notice u/s 148 for reopening the assessment on 29.03.2019, which the assessee contended was barred by limitation. The original assessment u/s 143(3) was completed on 17.03.2015.
Held
The Tribunal held that the notice u/s 148 was issued after the expiry of four years from the end of the relevant assessment year, and there was no compliance with the first proviso to Section 147, which requires the AO to record the failure of the assessee to disclose fully and truly all material facts. Therefore, the assumption of jurisdiction by the AO was invalid.
Key Issues
Whether the reassessment proceedings initiated u/s 147 were barred by limitation due to non-compliance with the proviso to Section 147, specifically the requirement to record the assessee's failure to disclose material facts when the original assessment was under Section 143(3) and the reopening was after four years.
Sections Cited
147, 148, 143(3), 149(1), 139, 142(1), 131, 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘G’ BENCH,
Before: SHRI SATBEER SINGH GODARA, & SHRI NAVEEN CHANDRA
This appeal by the assessee is directed against the order of the ld.
CIT(A), Delhi dated 31.01.2025 pertaining to A.Y 2012-13.
The Grounds of Appeal
taken by the assessee is as follows:
1. That on the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) (hereinafter referred as "CIT(A)" is bad both in the eyes of law and on facts. Page 1 of 9
2. That on the facts and in the circumstances of the case, assessment order passed u/s 147 of the Act is liable to be quashed being reopening of proceedings u/s 147 is barred by limitation i.e. after expiry of four years from end of the relevant assessment year, as case of appellant was already assessed u/s 143(3) and there is no failure on the part of appellant to disclose fully and truly all material facts necessary for its assessment.
3. That on the facts and in the circumstances of the case, assessment order passed u/s 147 of the Act is liable to be quashed being proceedings u/s 147 initiated merely on the basis of change of opinion on the same subject matter which have already been assessed u/s 143(3) which is in violation of law settled by the Hon'ble Supreme court in the case of Commissioner of Income Tax v Kelvinator India Limited (2010) 320 ITR 561 (SC).
That on the facts and in the circumstances of the case, initiation of assessment proceedings u/s 147 of the Act is bad in law being the same were initiated merely on the basis of information received from DDIT(Inv), Unit-3, Gurugram without having any cogent, definite material on record for the alleged accommodation entries in the form of share capital and without conducting independent enquiry regarding escapement of income.
5. That on the facts and in the circumstances of the case, the assessment proceedings u/s 147 of the Act were completed by the AO by not following the procedure laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v Income Tax Officer (2003) 259 ITR 19 which should be strictly adhered in proceedings u/s 147 of the Act.
6. That on the facts & in law in confirming addition of Rs. 1,70,00,000/- without providing the copy of relied upon un-substantiated information received from DDIT(Inv), Unit-3, Gurugram and un- substantiated and irrelevant statement of third person recorded by some other authority during search action in the case of examine the said third party for making addition and opportunity to cross person which is violation of principle of natural justice.
7. That on the facts and circumstances of the case, the learned CIT(A) has erred both on facts & in law in confirming addition of Rs. 1,70,00,000/- on account of share application money by treating the same as accommodation entry without appreciating the fact that the appellant has duly discharged its primary onus by furnishing abundant documentary evidences to prove identity & creditworthiness of investor companies and genuineness of transaction in which no defect
Page 2 of 9 has been brought on record by both the authorities i.e. AO & Ld. CIT(A).
8. That on the facts and circumstances of the case, the learned CIT(A) has erred both on facts & in law in confirming addition of Rs. 1,70,00,000/- on account of share application money by treating the same as accommodation entry based on non-service of Summons u/s 131 on the directors of the alleged investor companies without apprising the regular assessment records wherein notices u/s 133(6) were duly served and complied by said companies.
9. That on the facts and circumstances of the case, the learned CIT(A) has erred both on facts & in law in confirming arbitrary addition of Rs. 1,70,00,000/- on account of share application money as bogus/accommodation entry based on non-service of Summons u/s 131 on the directors of the alleged investor companies after long period of approx. 6 years that too without bringing any tangible or substantive material on record in support of allegation made by both the lower authorities.
That the grounds of appeal are independent and without prejudice to each other.
11.The appellant craves leave to add, amend or alter any of the grounds of appeal.
3. At the very outset, the ld AR of the assessee vehemently submitted that the instant appeal pertains to A.Y 2012-13 and the Assessing Officer has issued notice u/s 148 of the Income-tax Act, 1961 [the Act, for short] dated 29.03.2019 which is barred by limitation and hence is liable to be quashed. The ld AR stated that assessment order passed u/s 147 of the Act is liable to be quashed as the reopening of proceedings u/s 147 is after expiry of four years from end of the relevant assessment year, as case of appellant was already assessed u/s 143(3) and there is no failure on the part of appellant to disclose fully and truly all material facts necessary for its assessment. Page 3 of 9
4. Per contra the ld DR relied on the orders of the AO and the CIT(A).
We have heard the rival submission and have carefully perused the materials on record. We find that in the instant case, the assessee had filed the original ITR for A.Y 2012-13 on 24.10.2012. An assessment u/s 143(3) was framed vide order dated 17.03.2015. Thereafter, the Assessing Officer has issued notice u/s 148 of the Income-tax Act, 1961 [the Act, for short] dated 29.03.2019. In response to which the assessee filed an ITR 26.04.2019. The AO issued a notice u/s 143(2) dated 25.07.2019.
We find that the AO has recorded reasons for issue of notice u/s 148 for AY 2012-13 wherein he has given details and analysis of information received from DDIT(Inv.) and has invoked clause (c) of Explanation 2 of section 147 for reopening the assessment. There is however, no compliance of first proviso to section 147 to record that the income has escaped assessment for the reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. In such a factual matrix, we are called upon to adjudicate whether the notice u/s 148 dated 29.03.2019, issued after 4 years from the end of relevant assessment year, is barred by limitation.
We note that for the Assessment Year 2012-13, under Section 149(1) of the Income Tax Act as amended by the Finance Act, 2012, the time limits for issuing a notice were four years from the end of the relevant assessment year (until March 31, 2017); six years from the end of the relevant assessment year (until March 31, 2019) if the income escaping assessment was ₹1 lakh or more and sixteen years from the end of the relevant assessment year (until March 31, 2029) if the escaped income involved an asset outside India.
We also note that the provisions of section 149(1) are to be read in the light of the proviso to section 147 wherein reassessment notice under section 148 issued after the expiry of four years from the end of the relevant assessment year, cannot be sustained where the reasons recorded by the Assessing Officer do not show that the conditions laid down in the proviso to section 147 is fulfilled.
The proviso to section 147, provides that where an assessment under section 143(3) or section 147 has been made for the relevant assessment year, no action shall be taken under section 147 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 Page 5 of 9 response to a notice issued under section 142(1) or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year.
10. In view of the abovesaid provisions, an initiation made, in a case covered by the proviso to section 147, after the expiry of four years from the end of the relevant previous year can be sustained only if the conditions laid down in the said proviso is fulfilled. Otherwise, such initiation would be barred by limitation as per the proviso to section 147 as held in Orient Beverages Ltd. v. ITO, (1994) 208 ITR 509, 514 (Cal)] even though such initiation may not be time-barred keeping in view only the provisions of section 149(1). In other words, the provisions of section 149(1)(b) enacting provisions as to extended period of limitation can be invoked only in cases falling outside the ambit of the proviso to section 147 as held in Nestle India Ltd. v. Deputy CIT, (2016) 384 ITR 334 (Del).
The hon’ble Delhi High Court has consistently held that the recording of failure to make a full and true disclosure is a mandatory requirement for reopening an assessment after the four-year period where the return has been assessed u/s 143(3). This condition must be clearly documented by the Assessing Officer. The Delhi High Court has invalidated reassessment notices where the AO's reasons did not show
Page 6 of 9 the taxpayer's specific failure to disclose. In the case of Discovery Communications India Vs Addl. Commissioner Of Income Tax, Special in W.P.(C) 13225/2018 dated 08.11.2024, the hon’ble Delhi High Court held as under:
“26. The existence of failure on the part of the assessee to disclose fully and truly should not only be integral to the reasons but it must also be spelt out in the reasons as to what was to be disclosed but had not been disclosed. The absence of such averments in the reasons renders the whole exercise nugatory. Such lapse on the part of the AO cannot be regarded as a mere procedural irregularity but is a defect which goes to the root of the matter. The purported reasons that prompted the AO to reassess and disallow the expenditure incurred on DAP and production and translation expenses only demonstrate a change of opinion on the part of the AO, which cannot form the basis of reopening the assessment. *** 28. Consequently, one of the essential ingredients for reopening the assessment beyond the period of four years has not been satisfied in the present case. Reassessment proceedings are therefore bad in law”.
Applying the judicial precedents and interpretation of the provisions of section 147 r.w section 149 to the facts of the present case, we find that there is an absence of mandatory requirement of fulfillment of conditions laid down in the first proviso to section 147. The assessee has filed a return u/s 139 as well as in response to a notice issued section
The return filed u/s 139 of the Act has been examined/scrutinised u/s 143(3) of the Act. In such factual matrix, it was mandatorily required of the AO to record under proviso to section 147 of the Act that the Page 7 of 9 income has escaped assessment for the reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. In absence of fulfillment of the condition prescribed in proviso to section 147 of the Act, the assumption of jurisdiction cannot be held as valid and the notice u/s 148 is liable to be quashed. We order accordingly. The ground 2 is allowed.
Since the appeal is allowed on legal ground, no adjudication is made on other grounds of appeal. allowed.
Order pronounced in open court on 30.10.2025.