Reassessment Proceedings Are Null and Void Absent New Tangible Information

Fact and issue of the case

Aforesaid appeal by assessee for Assessment Year (AY) 2004-05 arises out of first appellate order passed by learned Commissioner of Income Tax (Appeals)-18, Chennai [CIT(A)] on 30-07-2018 in the matter of an assessment framed by Ld. Assessing Officer (AO) u/s 143(3) r.w.s. 147 on 31-12-2018. The grounds taken by the assessee read as under: –

The order of the Commissioner of lncome-tax(Appeals) in so far as it is against the assessee is contrary to law, erroneous and unsustainable on the facts of the case.

Reopening of Assessment :

The CIT(A) erred in upholding the reopening of assessment under sec.147 of the Act.

The CIT(A) failed to appreciate that the reopening was based only on change of opinion by the officer since the credits in the names of M/s. Jaya Printers and Dr.Namadhu MGR are part of the regular books that was considered by the officer in the assessment uls.143(3) and hence the reopening is untenable in law.

The CIT(A) further failed to appreciate that there was no reason to believe that income had escaped assessment and in the absence of any fresh material pointing to failure on the part of assessee to disclose particulars of income, the reopening is not in accordance with law and needs to be annulled.

The CIT(A) further failed to appreciate that there was no reason to believe that income had escaped assessment, since the credits in M/s. Jaya Printers and Dr. Namadhu MGR had been considered in the assessment uls.143(3) and hence the reopening is untenable in law.

The CIT(A) ought to have duly considered a catena of judicial decisions holding the assessment u/s. 147 as invalid, where there was no fresh material or where there was no failure of the assessee to disclose material facts and thus annulled the reopening of assessment. MERITS:-

The CIT(A) erred in confirming the addition of Rs.1,40,000, being the credits in the books of M/s Jaya Printers.

The CIT(A) failed to appreciate that the entire credits are duly reflected in the books of M/s. Kodanad Estate and hence the confirming the addition is unjust and unwarranted on facts of case.

The CIT(A) further failed to appreciate that the withdrawals from M/s. Kodanad Estate, in which the assessee is a partner, was credited in M/s. Jaya Printers and utilized for making tax payments and hence considering the books of both the concerns, and hence considering the same, the addition needs to be deleted.

The CIT(A) erred in confirming the addition of Rs.1,50,000 as rent received from property in Thiru Vi Ka Industrial Estate.

The CIT(A) failed to appreciate that the assessee does not own any property in the Industrial Estate fetching any rent and is also evident from the IT and WT statements for other asst. years and hence the addition made on mere surmises is unjustified and needs to be deleted.

The CIT(A) erred in confirming the addition of Rs.94,12,899, received by assessee as advertisement advance under sec.68 of the Act.

The CIT(A) failed to appreciate that the amount was received as advance from various parties for publication of Tamil New Year Malar/ souvenir by Dr. Namadhu MGR and credited in the books as advance and hence there was no basis to confirm the trade advance received by assessee as unexplained credits.

The CIT(A) further failed to appreciate that the ledger a/c copies filed clearly show that the amount remained as advance in the books until 31.3.2008, and transferred to advertisement charges collected and offered as income in the assessment year 2008-09 and lncome tax was also paid on that amount(Rs.94,1 2,899/-), hence the addition u/s.68 needs to be deleted.

The CIT(A) further failed to appreciate that the bonafide of receipt is evident from the fact that Rs.20,84,799 was received by cheques and so confirming the addition merely on conjectures and surmises is unjustified and warranted.

The CIT(A), in any view of the matter ought to have duly considered contentions of the assessee in the proper perspective deleted additions and allowed the appeal. As is evident, the assessee assails the validity of reassessment proceedings. The issues on merits are –

Addition of unexplained credit of Rs.1.40 Lacs;

Rent in respect of Thiru-vi-ka industrial estate;

unexplained credit in Dr. Namadhu MGR.

Observation of the court

Having heard rival submissions, the appeal is disposed-off as under. The assessee being resident individual is stated to be engaged in publication of newspapers etc.

The original return of income filed by the assessee was scrutinized u/s 143(3) on 18-12-2006 determining the income at Rs.529.40 Lacs. Subsequently, it was noted by Ld. AO that the assessee had furnished the statement of accounts without incorporating the opening balances. On the liability side of Balance Sheet, the details of Sundry Creditors for Rs.94.12 Lacs were not furnished. Besides, the assessee was found to have made investments during the year in various firms for which the sources were not furnished. Accordingly, the case was reopened and notice u/s 148 was issued within 4 years from the end of relevant assessment year. The assessee objected to proceedings on the ground that present proceeding tantamount to review of the concluded proceedings. However, Ld. AO referred to Explanation-1 to Sec.147 which specifically provides that production of accounts books or material evidences will not necessarily amount to disclosure within the meaning of Sec.147. Finally, the assessment proceedings were completed after making impugned additions. The Ld. CIT(A) upheld the action of Ld. AO against which the assessee is in further appeal before us.

Since legal issue raised by Ld. AR goes to the root of the assessment and contest very validity of reassessment proceedings, we take up the same first. We find that the original return of income was already scrutinized u/s 143(3). The case was reopened within 4 years. Accordingly, Explanation-1 to Sec.147 as referred to by Ld. AO would not apply in such a case. The perusal of assessment order would show that Ld. AO has not referred to any tangible material coming into his possession which would lead to formation of a belief that certain income escaped assessment in the hands of the assessee. Apparently, reassessment has been initiated on the same set of material as available before Ld. AO during the course of original assessment proceedings. This being so, the reassessment proceedings would be nothing would review of the order which is impermissible. The case law of Hon’ble Supreme Court in the case of Kelvinator of India Ltd. (2010; 320 ITR 561) support the case of the assessee wherein it was held that in the absence of any new tangible material, the case could not be reopened on mere change of opinion. The Hon’ble Court held that after 01-04­-1989, Ld. AO has power to reopen the case of the assessee provided there is ‘tangible material’ to come to conclusion that there is escapement of income from assessment. Further, reasons must have a live link with formation of belief. Respectfully following the same, we would hold that the reassessment proceedings were nothing but the review exercise undertaken by Ld. AO which is impermissible. Therefore, the reassessment proceedings are bad in law and hence, liable to be quashed. We order so. The case law of Hon’ble High Court of Madras in Cognizant Technology Solutions India (P.) Ltd. vs. ACIT (129 Taxmann.com 327), as referred to by revenue, is distinguishable on facts. In that case, the reasons recorded by Ld. AO revealed that certain relevant information and materials were not considered by Assessing Officer which would have to be taken into consideration while passing assessment order. The same is not the case here and there is no such allegation by Ld. AO in the present case. Accordingly, this case law renders no assistance to the case of the revenue.

Since the assessment order is held to be invalid, delving into the merits of the case has been rendered infructuous.

The appeal stand allowed in terms of our above order.

Order pronounced on 23rd June, 2023

Conclusion

In the result, appeal of the assessee is allowed and ruled in favour of the assessee

Assessment cannot be reopened because the requirement for reopening after four years has passed has not been met

Fact and issue of the case

These appeals have been filed by the Revenue and Cross Appeals by the assessee against order passed by the ld.Commissioner of Income Tax(A), Gandhinagar, Ahmedabad of even dated 8.8.2019 passed under section 250(6) of the Income Tax Act, 1961 [hereinafter referred to as “the Act” for short]for the Asst.Year 2011-12 and 2012-13

At the outset, it was pointed out that in both the cases, reopening had been resorted to by an order passed in terms of provision of section 147 of the Act on an identical issue. The addition so made by the AO had been challenged before the ld.CIT(A) both on legal ground challenging validity of the assessment framed ,as well as on merits of the additions made; that the ld.CIT(A) while deleting the addition made on merits found no merit in the legal ground raised by the assessee. Against this order of the ld.CIT(A), the Revenue has filed appeal challenging deletion of addition on merits by the ld.CIT(A) while the assessee has come in cross-objection raising legal ground before us. It was common ground that reopening was resorted to on identical issue on both the cases, and therefore, both the appeals are taken together for hearing and adjudication

We shall first deal with the COs filed by the assessee together, since the reopening was resorted to in both the years on an identical issue, and arguments of the ld.counsel for the assessee in both the years against re-opening were also identical. Since identical issues have been raised by the assessee in the CO, for the sake of convenience the grounds raised in the Asst.Year 2011-12 in CO No.3/Ahd/2020 are reproduced as under

The Learned CIT(A) has erred in dismissing all the grounds raised against reopening of the assessment

It is submitted that applying the principle laid down by Supreme Court in the case of CIT Vs. V. Corporation Bank Limited 254 ITR 791, the appellant has disclosed truly and fully fact in Note no. 6 of the Annual Report of the Company. There is no failure on the part of the appellant to disclose fully and truly the material facts necessary for the assessment year and hence re-assessment notice u/s 147 which is issued beyond 4 years is bad in law and is required to be quashed. The appellant relies on decision of Jurisdictional High Court of Gujarat in the case of Lincoln Pharmaceuticals Limited 375 ITR 561 (Gujarat). It is also submitted that re-opening cannot be done when all the material facts of which reassessment has been opened was filed at the time of original assessment vide its letter dated 01.11.2013 and 09.01.2014. The Learned CIT (A) has erred in not considering the decision Hon. Supreme Court in case of CIT Vs Kelvinator of India Ltd. (2002) 256 ITR 1 (Del.) (FB) (Asst. Yr 1997-198) approved by Supreme Court in (2010) 320 ITR 561 (SC)

It is also submitted that Ld. A.O. has not disposed off objection by passing a speaking order. The Ld. CIT (A) has erred in not considering the decision of Hon’ble Supreme Court in case of GKN Driveshafts Ltd which prescribed the procedure to deal with the initial objections raised against the issuance of notice u/s 148 of the Act. It is also submitted that re-assessment cannot be done on the basis of audit objections. The Honourable Apex Court held that the re-assessment based on opinion of audit party is not valid CIT Vs. Lucas TVS Ltd.249 ITR 306 (SC). Similar view has been taken in the following cases:

Idea Cellular Ltd. V DCIT (2008) 301 ITR 407 (Bom)

CIT V. Foramer France [2003] 264 ITR 566 (SC) (para 2)

The ld.counsel for the assessee began his arguments by stating that primary challenge to the assumption of jurisdiction in the present case by the AO to frame assessment under section 147 of the Act was that the reopening having been resorted to beyond four years from the end of the relevant assessment years in both the cases, it was in contravention to the very basic condition required by law for reopening the case beyond four years ,of the assessee having failed to disclose fully and truly of material facts necessary for that assessment year as per first proviso to section 147 of the Act. He first drew our attention to the first proviso to section 147 as under

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

Referring to the same, he pointed out that as per lawwhere initially assessment has been framed u/s 143(3) of the Act and reopening is to be undertaken after expiry of four years from the end of the relevant assessment year, there has to be a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for that year. He drew our attention to the decision of Hon’ble jurisdictional High Court in the case of Pr.CIT Vs. Pr.CITVs.Lincoln Pharmaceuticals Ltd., (2015) 375 ITR 561 holding categorically that when there was no failure on the part of the assessee to disclose fully and truly all the material facts, reopening of the assessment under section 147 of the Act could not be resorted to beyond a period of four years from the end of the relevant assessment year. Thereafter, he pointed out that this proposition squarely applied in the facts of the present case as under

That initially assessment was framed u/s 143(3) of the Act vide order dated 24-01-2013 and 30-01-2015 for A.Y 2011-12 and 2012-13 respectively. Reopening in both the case was beyond four years, notice u/s 148 being issued on 23.4.2016 and 26.8.2017 respectively, clearly beyond four years from the end of the relevant assessment years, which ended on 31.3.2016 for Asst.Year 2011-12 and 31.3.2017 for Asst.Year 2012-13

Observation of the court

We have heard parties and gone through the documents referred to before us, and also gone through the relevant provision of law, as also the case law relied upon before us. We find merit in the contention of the ld.counsel for the assessee that jurisdiction assumed in the present case both for Asst.Year 2011-12 and 2012­13 for reopening the case of the assessee under section 147 of the Act was not in accordance with law. The provision of law governing reopening of the case beyond four years, as pointed out by the ld.counsel for the assessee, requiring material facts necessary for assessment not being fully and truly disclosed by the assessee, is not disputed. Also not disputed is the fact that in both the appeals before us reopening was resorted to beyond 4 years Further, as rightly pointed out by the ld.counsel for the assessee, there is no charge by the AO in his reasons recorded of any material facts pertaining to the assessment of income of the assessee not being fully and truly disclosed by the assessee. As is evident from the bare perusal of the reasons recorded by the AO, and as has been rightly pointed out by the ld.counsel for the assessee, the reopening was resorted to for the reason that expenditure claimed by the assessee, and in its P&L account/revenue expenses claimed, ought to have been treated as capital. The reasons reveal that the AO formed this belief on the basis ofthe facts disclosed by the assessee in its financial statements. He noted that the assessee being Government body and in the business of construction of infrastructure facilities like road etc. was being given government grants for meeting expenses, and these grants were treated by the assessee as its liability. All expenditure incurred by the assessee were adjusted against this liability. All these facts have been noted by the AO from the records placed before him. Further, the AO hasnoted that during the impugned year certain government grants were refunded to the Government, and accordingly, there was a shortfall in meeting expenditure of the assessee. This shortfall, since could not be set off against the grants, was debited to the P&L account of the assessee. All these facts undeniably and as is evident from the reasons, have again been derived from the records of the assessee only. Therefore, as far as the claim of expenditure as revenue expenditure is concerned, there is no case of the AO that no material facts relating to the same has not been duly or truly disclosed. Asper the AO himself, the assessee has completely disclosed the fact of the receipt of Government grants, and also manner of treating of the same in its books of accounts as liability. The assessee has also disclosed manner of adjustment of expenditure against these government grants. The assessee has also disclosed the fact of refund of government grants and further also the fact of expenditure incurred in the current year itself of the government grants received being debited to its P&L account. All the above facts have been completely disclosed by the assessee and is the case of the AO also as per his reasons. Only reason for formation belief of escapement of income is that since as per the AO, the assessee treated its grants as capital, the expenditure incurred also ought to have been capitalised, which means that it is only with regard to the treatment of a transaction whether revenue or capital that the AO has formed a belief of escapement of income. This cannot be said to relate to non disclosure of any material facts by the assessee. The material fact in this case is the incurrence of expenditure, which the assessee has clearly disclosed. The assessee has also clearly disclosed all facts relating to the government grants received and also its treatment. Moreover, as rightly pointed out by the ld.counsel for the assessee, it is not even the case of the AO that the assessee had failed to disclose truly and fully all material facts relating to incurrence of expenditure, claimed as revenue by the assessee

In view of the above, it is clear that prerequisite laid down in law for reopening of the case beyond four years is not found to be fulfilled in the present case. The reopening by the AO therefore, we hold, in both the cases is without jurisdiction; the assessment orders, therefore, passed as a consequence are invalid and directed to be set aside

In the result, both the cross-objections are allowed

Since we have set aside the assessment order as invalid, the appeals of the Revenue relating to the merits of the additions, being academic in nature, are dismissed as above

In the result, appeals of the Revenue are dismissed and Cross-objections of the assessee are allowed in above terms

Order pronounced in the Court on 19th April, 2023 at Ahmedabad

Conclusion

In the result, appeal of the assessee is allowed and ruled in favour of the assessee

Read the full order from here

Addition without Taking into Account Assessee Submissions – ITAT resolves the issue

Fact and issue of the case

The present appeal has been filed by the assessee against order of the learned Commissioner of Income-tax (Appeals)-5, Ahmedabad [hereinafter referred to as “CIT(A)” for short] dated 24.10.2019 passed under Section 250(6) of the Income Tax Act, 1961 [hereinafter referred to as “the Act” for short] for the Assessment Year (AY) 2011-12

The brief background of the case is that the assessee’s case was reopened for scrutiny for the reason that the AO had information that she had invested in Bombay Stock Exchange amounting to Rs.25,21,525/- and made credit card payment of Rs.3,45,000/- in her bank account with City Bank Ltd. in the impugned year under consideration. The assessee was served with a notice under Section 148 of the Act; in response to which she filed return of income of Rs.2,54,067/-. Thereafter, in response to the notices issued to her to explain the source of investment in Bombay Stock Exchange and the source of payment of credit card, the assessee filed due reply submitting that she had nothing to do with the same and it was her husband who was looking into the entire matter and an affidavit of her husband was also filed in this regard. The Assessing Officer, thereafter, noting that no details explaining the source of investment had been submitted by the assessee, made addition of the investment of the assessee in Bombay Stock Exchange and the credit card payment treating the same as unexplained investment and expenses of the assessee, resulting in an addition of Rs.28,66,525/- (investment in BSE Rs.25,21,525/- + credit card payment Rs.3,45,000/-) to the income of the assessee

The matter was carried in appeal before the learned CIT(A) who upheld the order of the Assessing Officer. Aggrieved by the order of the learned CIT(A), the assessee has filed the present appeal before us raising following grounds

That the reassessment proceedings and assessment order passed by the Ld. AO is bad in law, in particular the non issue of notice under Section 143(2) of the Act and therefore, the order passed by the ld. AO is without jurisdiction and had in law and therefore the order passed by the ld. AO is required to be quashed and addition made therein should be deleted in full

That the learned CIT(A) has erred in law and facts by confirming the addition of undisclosed investment and expenditure of Rs.28,66,525/- (investment in BSE Rs.25,21,525/- and Rs.3,45,000/- of credit card payment) and therefore the learned AO is to be directed to delete the said addition while computing the total income

Ground of appeal No.1 was not pressed by the learned Counsel for the assessee before us and the same is, therefore, dismissed as not pressed

Vis-à-vis Ground No.2 raised on merits of the case, the solitary contention of the learned Counsel for the assessee was that both the authorities below had ignored the submissions filed by the assessee explaining the source of investment and expenses and had given incorrect finding that no details had been submitted by the assessee. In this regard, he drew our attention to the acknowledgement of the e-submission made before the Assessing Officer on 11.12.2018 submitting the ledger account of the broker through whom investment was made and the details of scripwise profit and loss incurred by the assessee along with written submissions made. The acknowledgement of the submission with No. 11121810963855 was placed before us at page no. 4 of the paper-book. Paper-book page Nos. 5-10 was the enclosures, including the submission made by the assessee and the statement of the broker and scripwise details of profit and loss. Drawing our attention to the submission made before the Assessing Officer placed at page no.5 of the paper-book, it was pointed out that with respect to the credit card payment the assessee had denied making any such payment and had asked the Assessing Officer to provide the details of the same. It was also pointed out from the letter that the ledger account of the broker was submitted for the transactions in shares made during the year and it was also mentioned that the savings account of the assessee in Bhuj Mercantile Co-Op. Bank Limited with Savings Account No.81936 was used for the purpose. It was also pointed out from the submission that the assessee had mentioned that it had incurred loss of Rs.3,13,613/- in the scripts traded during the year and the details of the same was also submitted. Learned Counsel for the assessee contended that despite of the above explanation and details submitted by the assessee with regard to the investment, scripwise details and credit card expenses made, both the authorities below had held that no details were submitted by the assessee while treating the investments and the expenses as unexplained. He, therefore, pleaded that the matter be restored back to the Assessing Officer for considering the reply of the assessee. The learned Departmental Representative, however, relied on the orders of the authorities below

Observation of the court

I have heard both the parties. As transpires from the orders of the authorities below, the addition to the income of the assessee on account of unexplained investment in Bombay Stock Exchange of Rs.25,21,525/- and unexplained source of payment of credit card amounting to Rs.3,45,000/- was made in the absence of any details submitted by the assessee before the authorities. However, before us, the learned Counsel for the assessee has demonstrated that due details were filed with regard to both the issues. As noted above, the assessee had filed submissions explaining that no investment had been made in scripts but on the contrary the assessee had traded in scripts and incurred losses during the year; ledger account of the broker reflecting the said fact as also detailed scripwise withdrawal was also filed. Similarly, with respect to expense incurred on credit card payment, the assessee had denied making any such payment. Therefore, clearly, the orders passed by the authorities below had ignored the submissions of the assessee. In the interest of justice, therefore, the issue needs reconsideration and, therefore, the matter is restored back to the file of the Assessing Officer to be decided afresh after giving due opportunity of hearing to the assessee and considering all the contentions and explanation in this regard

Ground of appeal No.2 raised by the assessee is thus allowed for statistical purposes

In effect, the appeal of the assessee is partly allowed for statistical der pronounced in the open Court on 29th March, 2023 at Ahmedabad

Conclusion

In the result, appeal of the assessee is allowed and ruled in favour of the assessee

If the Assessee did not fail to disclose during the initial assessment, any reassessment made after four years is invalid

Fact and issue of the case

This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income-tax (Appeals)-3, Chennai, dated 19.08.2020 and pertains to assessment year 2011-12.

The assessee has raised the following grounds of appeal:

“1. The order of the ld. CIT (A) confirming the Assessment Order is contrary to facts and circumstances of the case.

2. The ld. CIT (A) failed to appreciate that when all primary materials and documents were made available before the Id. AO along with disallowance calculation us/ 14A, if not satisfied, it is for him to apply Rule 8D and appropriately determine the amount of expenditure filed for the purpose of disallowance and if he had failed to do so, he could not furnish it as a reason for reopening a concluded assessment.

3. The ld. CIT (A) failed to appreciate that Section 147 confers the power to Id. AO to re-assess and not the power to review.

4. Further, the ld. AO order failed to take note of the limitation u/s 149 in the instant case as the notice for the reassessment proceedings was issued on 13/09/2017, which is beyond four years from the end of the assessment year when the original assessment order was passed u/s 143(3).

5.For the above reasons and other reasons adduced at the time of hearing, the additions may kindly be deleted and justice be rendered.”

The brief facts of the case are that, the assessee has filed his return of income for the assessment year 2011-12 on 16.09.2011, declaring loss of Rs. 1,10,97,021/-. The case was selected for scrutiny and assessment has been completed u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) on 20.03.2014. The case has been subsequently re­opened for the reasons recorded and notice u/s. 148 of the Act was issued on 13.09.2017. During the course of assessment proceedings, the AO noticed that the assessee has earned dividend income of Rs. 31,96,000/-, which was claimed as exemption u/s. 10(34) of the Act. However, made disallowance of expenditure u/s. 14A to the tune of Rs. 92,276/- only. Therefore, the AO, after considering relevant facts completed assessment u/s. 143(3) r.w.s. 147 of the Act on 17.09.2018, and determined total income of Rs. 94,22,580/- by making addition towards disallowance of expenditure u/s. 14A of the Act for Rs. 1,96,83,560/-, and disallowance of interest on car loans for Rs. 84,984/-. The assessee carried the matter in appeal before the first appellant authority, but could not succeed. The ld. CIT(A), for the reasons stated in their appellant order dated 19.08.2020, dismissed appeal filed by the assessee. Being aggrieved by the CIT(A) order, the assessee is in appeal before us.

The Ld. Counsel for the assessee, submitted that the re- opening of assessment u/s. 147 of the Act, is bad in law and liable to be quashed because there is no failure on the part of the assessee, to disclose necessary facts for completion of assessment.  He further submitted that, the original assessment order has been completed u/s. 143(3) of the Act and assessment has been re-opened beyond four years from the end of the relevant assessment year. In this case, the assessment has been re-opened beyond four years, then there should be an allegation that there is a failure on the part of the assessee to disclose fully and truly all material facts. In this case, the AO has called for necessary details with regard to disallowance u/s. 14A by way of specific questionnaire issued u/s. 143(2) of the Act, for which the assessee has filed complete details including statement of computation of disallowance u/s. 14A of the Act. Therefore, it cannot be said that there is a failure on the part of the assessee. In this regard he relied upon the decision of Hon’ble Madras High Court in the case of City Union Bank vs ACIT [2020] 425 ITR 475 (mad).

The Ld. DR present for the revenue, referring to explanation (1) to section 147 of the Act submitted that, production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of foregoing proviso. Therefore, there is no merit in arguments of the assessee that re-opening of assessment is bad in law.

Observation by the tribunal

The has heard both the parties, perused materials available on record and gone through orders of the authorities below. It is an admitted fact that the original assessment has been completed u/s. 143(3) of the Act on 20.03.2014. It is also an admitted fact that notice u/s. 148 of the Act dated 13.09.2017 is beyond four years from the end of the relevant assessment year. Thus, proviso to section 147 of the Act would come into operation, and as per said proviso, where the assessment under sub section (3) of section 143 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 disclose fully and truly all material facts necessary for his assessment for that assessment year. In light of above proviso to section 147 of the Act, if you examine the case of the assessee, in the original assessment proceedings, the AO had issued notice u/s. 143(2) of the Act on 24.05.2018 with a specific question of 14A disallowance, for which the assessee has filed computation of disallowance u/s. 14A r.w.r. 8D of the I.T. Rules, 1962. From the above, it is very clear that there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. Since, the notice u/s. 148 of the Act dated 13.09.2017 is beyond four years from the end of the relevant assessment year, and further there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for that assessment year, in our considered view notice issued u/s. 148 of the Act, is bad in law and liable to be quashed. This legal proposition is supported by the decision of Hon’ble Madras High Court in the case of City Union Bank Ltd vs ACIT (supra), where the Hon’ble High Court held as under: “Held, allowing the petition,

(i) that the assessee had demonstrated that the conditions precedent to the exercise of jurisdiction under section 147 did not exist and the Assistant Commissioner had therefore no jurisdiction to issue the notice in respect of the assessment year 2011-12 after the expiry of four years. When the issue touches on the jurisdiction of the authority, the exist ence of alternative remedy was no ground to deny relief to the assessee.

(ii) That there was no failure on the part of the assessee. On the other hand, there appeared to be a failure on the part of the Assessing Officer to make an appropriate determination of the amount of expenditure in terms of section 14A. The other reason cited by the authority was also not sufficient. It was beyond dispute that the census figures for the year 2011 were made available only a few years later. The assessee could not have looked into the future while submitting its return of income. The notice was not valid.”

In this view of the matter and by considering facts of this case, and also by following the decision of Hon’ble High Court of Madras in the case of City Union Bank Ltd vs ACIT, we are of the considered view that re-opening of assessment u/s. 147 of the Act and consequent notice issued u/s. 148 dated 13.09.2017 is bad in law and liable to be quashed and thus we quash re-assessment order passed by the AO u/s. 143(3) r.w.s. 147 of the Act dated 17.09.2018.

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

Order pronounced in the court on 29th March, 2023 at Chennai.

Conclusion

In the result, appeal of the assessee is allowed and ruled in favour of the assessee