AO must clearly indicate facts not disclosed by Assessee leading to escapement in a case covered by S.147 of the Income Tax Act

The Notice issued under Section 148 of the Income Tax Act, 1961 (Act) was sought to be quashed whereby the Assessing Officer (AO) had intimated the Assessee for reopening of assessment. Assessee in response submitted that the return as originally filed under Section 139 of the Act be treated as return for the purpose of Section 148 and further asked for the reasons recorded under Section 148. AO however in recorded reasons proposed for the reopening. Assessee submitted their objections to the reopening of assessment on the ground that reopening is initiated on the basis of review or re-appreciation of the same material and no fresh material of any sort has come in the possession of the department as also there has reopening is initiated on the basis of review or re-appreciation of the same material and no fresh material of any sort has come in the possession of the department as also there has been no failure on the part of the Assessee in disclosing fully and truly all material facts. The objections of Assessee were however rejected.

It was the admitted position that the notice was issued beyond the period of four years from the end of the relevant assessment year and accordingly first proviso of Section 147 of the Act would become applicable. Accordingly it was contended by the Assessee that in a case where the proviso to section 147 of the Act was applicable, it must be clearly indicated that the understatement of income was on account of the failure on the part of the Assessee to fully and truly disclose all material facts necessary for the assessment.

AO while mentioning that income had escaped assessment because of the failure on the part of the Assessee to fully and truly disclose the material facts for assessment, had no where indicated as to which material fact was not fully and truly disclosed by the Assessee. In such circumstances, no grounds existed for re opening the assessment after the expiry of four years from the relevant assessment year. The notice under section 148 of the said Act was based on re-appreciation of the same material on record. Accordingly, the notice issued under section 148 of the said Act was held to be liable for quashing.

[Global Signal Cables (I) Pvt. Ltd vs. DCIT]
(Delhi HC, 17.10.2014)