By TIOL News Service

CHENNAI, OCT 24, 2018: THE issue before the Bench is - Whether any fresh information filed before the AO during the process of re-assessment u/s 147, which gives force to the belief of the AO that certain income of the assessee had escaped assessment, can be construed as tangible material for reopening the assessment once again. And the verdict is YES.

Facts of the case

THE reassessment was initiated in the case of the assessee by issuing notice u/s 148. During the course of hearing, the assessee was asked the details of sources and nature of cash deposits and to file the copies of bank accounts and other evidences. The AO on scrutiny of bank accounts, completed the reassessment by adding the short fall in cash withdrawal of Rs.10.50 lakhs as unexplained income. However, the AO once again reopened the assessment by issuing notice u/s 148 for the reason that one S.Nagarajan has received a sum of Rs.2.75 crores from the deceased L.S.Abinesh, husband of the assessee, for purchase of property through his bank account and that sources for such advance made require to be verified. The assessee objected the reopening by contending that during the course of the first reassessment proceedings, copies of bank statements, receipts and payments account were produced including the sources of all deposits made and that the assessment was completed after due verification of all receipts and payments and the sources and therefore, the proposal to reopen to re-verify the source of advance given to S.Nagaraj amounts to change of opinion. It was also informed that there was no material available to conclude that the income had escaped assessment for issuing notice u/s 148. However, the AO rejected the objection. It was also contended that the very reopening of the assessment for the second time was beyond four years and therefore, was barred by limitation.

The High Court held that,

++ it is evident that the present issue, namely, the advance made to the said S.Nagarajan to the tune of Rs.2.75 crores for purchase of property was not the issue during the earlier reassessment proceedings. Accordingly, in pursuant to the earlier reopening of the assessment under section 147, an order of assessment was passed on 30.12.2011 under section 143(3) read with section 147 of the Income Tax Act, 1961. Only during the course of such re-assessment proceedings, the assessee has filed the statement of receipts and payments, wherein payment made to S.Nagarajan as advance to the tune of Rs.2.75 crores has also been referred to. Such material filed before the Assessing Officer, during the earlier re-assessment proceedings also containing the disclosure of advance made to S.Nagarajan is sought to be relied on by the assessee to contend that there was full and true disclosure of all material facts before the Assessing Officer and therefore, invoking the first proviso under section 147 to reopen the assessment beyond the period of limitation, cannot be sustained. On the other hand, the said material is sought to be relied on by the Revenue as a tangible material for reopening the assessment once again. It is not in dispute that the original assessment can be reopened at any number of times within the period of limitation prescribed under section 147 read with section 149. In this case, admittedly, the reopening of the assessment was initiated after the period of four years. In order to justify such reopening after such limitation period, the Revenue has to satisfy that any one of the ingredients as stipulated under the first proviso to section 147 is satisfied;

++ the original return filed by the assessee did not reflect the subject matter income, namely, the advance made by the assessee to the said Nagarajan of a sum of Rs.2.75 crores. When the earlier reopening proceedings was initiated with issuance of notice under section 148, the assessee did not file a fresh return by disclosing the subject matter income and on the other hand, she made a request to treat the return already filed for the assessment year 2009-10, as the one filed in response to the said notice. Therefore, it is evident that the original return filed by the assessee, which is sought to be treated as that of the return filed in response to the notice under section 148, did not disclose truly and fully the material facts, more particularly, in respect of the subject matter transaction. Therefore, such transaction which came to the notice of the Assessing Officer, while reopening the assessment earlier, is certainly, a tangible material, based on which, the present reopening under section 147, can be resorted to. Admittedly, this material was not existing at the time of original assessment. No doubt, it is sought to be contended that the said material was placed before the Assessing Officer during the earlier reassessment proceedings and however, he has not taken note of the same. I have already pointed out that the earlier reopening of the assessment was based on some other issue and therefore, the assessee is not justified in contending that no new material is available before the Assessing Officer for the present reopening.

(See 2018-TIOL-2246-HC-MAD-IT)