Issue examined under original assessment proceeding: Whether re-opening in such case is justified
Outcome: In favour of Assessee
- The Assessee had filed its return of income for A.Y. 2009-10 originally on 25.09.2009 showing loss of Rs. 17.64 crores. The said return of income was processed under section 143(1) of the Act on 07.10.2010. Later on, the Assessee`s case was selected for scrutiny under section 143(2) of the Act. The scrutiny assessment was completed and an order under section 143(3) of the Act dated 28.12.2011 was passed on assessed total income at Rs. 2.53 crores after disallowing derivative loss of Rs. 20.17 crores.
- Afterwards, the Assessee’s case was reopened under section 147 of the Act on the basis of a report/ information made available by Income Tax Investigation Wing, Kolkata. The said report stated that a search & seizure operation and post search investigation/ enquiry were carried out in the case of M/s Mandapam Commercial Ltd., the Investigation Wing found that during the relevant previous year the Assessee Company brought its unaccounted money of Rs. 14.85 crores in its books of account through accommodation entries which were provided by M/s Mandapam Commercial Ltd. In course of enquiry, after analyzing all the related bank account of web of companies engaged in providing accommodation entries, transaction contained therein, following the cash trail and statement of director of M/s Mandapam Commercial Ltd. which was recorded on oath under section 131 of the Act, it was finally held that the Assessee Company had taken accommodation entries from M/s Mandapam Commercial Ltd, in the guise of share transaction. Based on the above facts, the Assessing Officer reopened the Assessee`s case under section 147/ 148 of the Act and issued notice under section 148 of the Act for A.Y. 2009-10.
- In the reasons supplied to the Assessee for re-opening of the case, there was even no whisper, what to speak of any allegation, that the Assessee had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there was an escapement of income chargeable to tax.
- Merely having a reason to believe that income had escaped assessment, was not sufficient to reopen assessments beyond the four year period. The escapement of income from assessment must also be occasioned by the failure on the part of the Assessee to disclose material facts, fully and truly. This was a necessary condition for overcoming the bar set up by the proviso to section 147 of the Act. If this condition was not satisfied, the bar would operate and no action under section 147 could be taken.
- As one of the conditions precedent for removing the bar against taking action after the said four year period remained unfulfilled, therefore, the reopening assessment under section 147 of the Act were to be quashed in the present case.