While quashing the reopening notice issued under Section 148 and the consequential reassessment order against Ish Buildcon (appellant/ assessee), the New Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has clarified that where an assessment has originally been completed under Section 143(3), and the Revenue seeks to reopen it after expiry of four years from the end of the relevant assessment year, the validity of such reopening depends on the Assessing Officer specifically recording that the escapement of income was due to the assessee’s failure to disclose fully and truly all material facts necessary for assessment.
If this jurisdictional requirement under the first proviso to Section 147 is absent, the reopening is bad in law and liable to be quashed, even if the Revenue otherwise relies on investigation material alleging accommodation entries, added the Tribunal.
The Division Bench comprising Satbeer Singh Godara (Judicial Member) and Naveen Chandra (Accountant Member) noted that the notice under Section 148 of the Income Tax Act was issued on March 29, 2019 for AY 2012-13, which was beyond four years from the end of the relevant assessment year, and that the original assessment had admittedly been completed under Section 143(3) on March 02, 2015. It further noted that, in the reasons recorded, the AO himself acknowledged that the information regarding alleged accommodation entries from entities controlled by Himanshu Verma was available with him at the time of the original scrutiny assessment, though he also inconsistently stated that such information had been received later.
On that basis, the Tribunal held that once reassessment was sought to be made beyond four years in a case where the original assessment had been completed under Section 143(3), the first proviso to Section 147 became mandatory, and the AO was required to expressly record that income had escaped assessment because of the assessee’s failure to disclose fully and truly all material facts necessary for the assessment. The Tribunal found that this essential jurisdictional requirement was absent from the reasons recorded.
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Briefly, the case arose from information received by the Assessing Officer from the Investigation Wing, Faridabad, alleging that the assessee/ appellant had received accommodation entries in the form of share capital/share premium aggregating to Rs. 6.96 crore from entities allegedly controlled by entry operator Himanshu Verma. Based on this, the AO made an addition of Rs. 6.96 crore under Section 68 of the Income Tax Act and a further addition on account of alleged commission expenditure under Section 69C. The assessee challenged both the reopening and the additions, with its principal case being that the reopening was made after four years from the end of the relevant assessment year, despite the original assessment having already been completed under Section 143(3) of the Income Tax Act.
