Reopening/Reassessment u/s 147/148 on retrospective amendment bad as there is no failure on the part of assessee to disclose fully/truly all material facts

In a recent judgment, ITAT Delhi has stated that a concluded assessment can not be reopening u/s 147/148 based on a retrospective amendment in Law as there could not be any failure on the part of the assessee to disclose fully and truly all material facts.

Case Law Details:
ITA Nos. 4314 & 4315/Del/2010

Assessment Years: 2001-02 & 2002-03
M/s. Magppie Exports vs. Deputy Commissioner of Income
Date of Judgment/Order: 08/04/2016

Brief facts of the Case:
The assessee filed its return of income after claiming deduction under section 80HHC and section 80IA of the Income-tax Act, 1961 and the scrutiny assessment under section 143(3) was duly completed allowing the deduction under section 80HHC and 80IA.

Subsequently, on the basis of a retrospective amendment in section 80HHC, the Assessing Officer (AO) was of the view that deduction u/s 80HHC was incorrectly allowed, and therefore after recording reasons to believe that income has escaped assessment, and after taking necessary approval from the Commissioner of Income Tax, a notice under section 148 of the Act. However, no compliance was made by the assessee and the AO completed assessment ex-parte under section 144/147 of the Act making disallowance of Rs. 1,16,73,784/-.

Important Case Laws referred:
Global signal cables (India) Private Limited vs. DCIT WPC No. 747/2014 Delhi High Court

CIT Thiruvanathapuram vs. B Mohanachandranan Nair (2014) Kerala High Court
Orient Craft Ltd reported in (2013) Delhi High Court
Sadbhav Engineering Ltd versus DCIT Gujarat High Court
Pawan Kumar Jain vs. Union of India (2014) Delhi High Court
CIT versus Awani Exports (2015) Supreme Court

Contentions of the Assessee:
(a)There was no failure on the part of the assessee in disclosing fully and truly all material facts necessary for the assessment

(b) that in the reasons recorded, it was not mentioned what was the failure on the part of the assessee
(c) There was no new tangible material before the Assessing Officer
(d) The case cannot be reopened on the basis of a retrospective amendment in law.
(e) The said amendment in section 80HHC had been held prospective by the Hon’ble Courts

Important Excerpts from ITAT Judgment:
AO has not mentioned which was the material fact which was not disclosed by the assessee truly and fully, ……… the reopening proceedings after expiry of 4 years from the relevant years are not valid as per law.

…. we find from the reasons recorded that there was no fresh tangible material before the Assessing Officer. In the circumstances respectfully following the Hon’ble jurisdictional High Court in the case of Orient Craft (supra) and the decision of the Tribunal in the case of Moti Lal R Todi (supra), the reassessment proceedings under section 147 of the Act in the case of the assessee are not justifiable, illegal and bad in law.

In response to the question raised by the revenue whether the retrospective amendment of law and subsequent judgement of the Apex Court after filing of the return of income and completion of assessment under section 143(3) can be a basis for reopening of the assessment under section 147 of the Income-tax Act, 1961 the court held as under: “….. First of all on undisputed facts that the assessee cannot be blamed for filing return by contemplating a possible amendment of section 80 HHC of the Act. Therefore one cannot estate that there was an escaped assessment of tax which could be reopened within a period of 4 years from the end of the relevant assessment year. Admittedly the amendment and the judgement relied upon by the Assessing Officer was subsequent to the finalisation of the assessment proceeding. It is trite law that subsequent amendments are subsequent interpretation of the statute is not a ground to reopen concluded transactions. Admittedly the assessment had been completed under section 143(3) of the Act and in order to reopen the same, necessarily it has to be done within a period of 4 years…… “

…… the proceedings under section 147 of the Act were initiated by the Assessing Officer in view of the retrospective amendment to the provisions of sections 28 and 80HHC of the Act w.e.f. AY 98-99, by Taxation Laws Amendment Act, 2005, however, we find that the Jurisdictional High Court in the case of Pawan Kumar Jain Vs. Union of India, [2014] 46 taxmann.com 341 (Delhi) following the judgment in the case of Avani Exports vs. CIT (2012) 348 ITR 391/23 taxmann.com 62/209 taxmann 59(Mag) has held the said amendment is prospective in nature and not retrospective.

…….. their Lordship in the judgment of CIT Vs. Avani exports reported in ( 2015) 58 taxmann.com 100 (SC), has upheld the findings of the Hon’ble High Court of Gujarat.

…..we find that the reason on the basis of which the notice under section 148 was issued, no longer survive in view of the judgement of the Hon’ble Supreme Court in the case of Avani Exports(supra), the proceedings under section 147 of the Act also cannot be sustained.

In view of our detailed discussion in preceding paras on the issues raised before us, we are of the considered opinion that there was no failure on the part of the assessee to disclose fully and truly all material facts in respect of the assessment and the case has been reopened beyond the period of 4 years from the end of the relevant assessment year, the proceedings of reopening under section 147 of the Act are without jurisdiction and not sustainable. Accordingly, we quash the proceedings under section 147 of the Act in the case of the assessee for the year under consideration.

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