When the assessee had disclosed all the material facts necessary for making the assessment and there was no failure on his part, reassessment proceedings u/s 147/148 after 4 years is bad in law
1. Assessee is a company engaged in the manufacture of boxes and trading in timber
2. For the assessment year 1991-92, the assessee filed its return declaring a total income of Rs.1,88,483/-. Subsequently, a search and seizure operation under Section 132(1) of the Act was carried out at the premises of the assessee on 12.03.1992
3. At the time of search and seizure operation the assessment proceedings had not started on the basis of the return filed by the assessee
4. Accordingly, when assessment proceedings were started by the Assessing Officer, the assessee was asked to explain each and every document seized during the course of search and seizure operations
5. The submission and reply made by the assessee was considered and thereafter the Assessing Officer passed an assessment order on 31.03.1994 making addition in the income of the assessee
6. The assessee thereafter preferred an appeal, which was partly allowed by the Appellate Authority on 17.02.1995, pursuant to which the appeal effects were given
7. For the assessment year 1992-93 an assessment order was made on 31.03.1995. The assessee, being aggrieved filed an appeal
8. The Ist Appellate Authority passed an order on 12.01.2004 and, while disposing of the appeal for the assessment year 1992-93, made certain observations for the assessment year 1991-92
9. Pursuant to the observation made by the Appellate Authority, the Assessing Officer issued a notice under Section 148 of the Act on 10.04.2001 recording reasons to believe that certain income chargeable to tax had escaped assessment
10. The reasons to believe was basically based on the observations made by the Ist Appellate Authority in its order for the assessment year 1992-93
11. Pursuant to the notice issued under Section 148 of the Act, a re-assessment order for the assessment year 1991-92 was passed by the Assessing officer on 28.03.2003. The income was increased and an addition of Rs.28,37,343/- was made on account of bogus purchases made from six parties of Nagaland
12. The assessee, being aggrieved, filed an appeal questioning the assessment order on the ground of limitation contending that the proceedings initiated under Section 147/148 of the Act were barred by limitation in view of first proviso to Section 147 of the Act
13. The Ist Appellate Authority after considering the matter held that the Assessing Officer was justified in reopening the assessment order after four years from the end of the assessment year in question and also confirmed certain additions made by the Assessing Officer
14. The assessee, being aggrieved, filed a second appeal before the Tribunal, which was allowed by the Tribunal by its order dated 05.05.2005
15. The Tribunal held that the proceedings initiated under Section 148 was invalid inasmuch as there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for making an assessment and, therefore, held that the notice issued under Section 148 of the Act beyond the period of four years from the end of the assessment in question was invalid
16. The Department, being aggrieved, has filed the present appeal under Section 260-A of the Act
17. The appeal was admitted on the following substantial question of law:
“(1) Whether on the facts and circumstances of the cased, the Hon'ble Tribunal erred in law in quashing the assessment completed u/s 143(3)/148 by observing that the issue of notice u/s 148 was beyond the period of four years from the end of relevant assessment year without appreciating that the notice u/s 148 was issued by the AO in consequence to the directions given by the Ld. CIT (A) and as per the provisions of section 150(1) of the Act. There is no bar of limitation for issue of notice u/s 148 in consequence of or to give effect to such directions of the appellate authorities?
(2) Whether on the facts and circumstances of the case, the Hon'ble Tribunal erred in law in quashing the assessment made u/s 143(3)/148 by observing that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment without appreciating that bogus purchases aggregating to Rs.34,90,866/- were found to have been made by the assessee from six non-existent parties of Nagaland, and therefore it could not have been held that the assessee had disclosed fully and truly all material facts relating to the said bogus purchases at the time of assessment.”
18. After hearing both parties Honb. High Court dismissed the appeal filed by the department
In the instant case, the Tribunal has given a categorical finding that the assessee had disclosed all the material facts necessary for making the assessment and there was no failure on his part. We find that this finding of the Tribunal is perfectly correct and, as we have observed, the Assessing Officer in his original assessment proceedings had considered each and every document and the explanation given by the assessee on the seized documents. Therefore, it was not a case where the assessee failed to disclose fully or truly all material facts necessary for making the assessment. The notice, in our view, issued under Section 148 of the Act was invalid.
In the light of the aforesaid, we do not find any error in the order passed by the Tribunal. The appeal fails and is dismissed. The questions of law are answered accordingly.
Cases referred to