Income Tax - Reopening of assessment not valid if it is based on pre-existing material without any fresh tangible evidence

ITAT Mumbai Quashes Reassessment Notice Against Rupa Infotech & Infrastructure Pvt. Ltd. in Tax Deduction Dispute Tribunal rules that reopening of assessment under Section 147 of the Income Tax Act, 1961, was invalid due to lack of new tangible evidence and full disclosure by the assessee.

In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Mumbai's "D" Bench has quashed the reassessment notice issued to Rupa Infotech & Infrastructure Pvt. Ltd., a private limited company engaged in construction and property development, in a case concerning the eligibility for tax deduction under Section 80IA of the Income Tax Act, 1961. The tribunal ruled that the reopening of the assessment was invalid as it was not based on any fresh tangible material and was issued beyond four years after the end of the relevant assessment year.

The assessee, Rupa Infotech & Infrastructure Pvt. Ltd., had initially claimed a deduction of Rs. 4,69,76,429 under Section 80IA for its project, Rupa Technopark. The Deputy Commissioner of Income Tax, Mumbai, issued a notice for reassessment under Section 147, claiming the deduction was ineligible because the company did not meet the required condition of allotting a minimum of 52 units in its project and allegedly claimed deductions on resale of units.

The ITAT, comprising Judicial Member Smt. Beena Pillai and Accountant Member Smt. Renu Jauhri, found that the original assessment for the 2014-15 assessment year was completed after due verification, and the deduction was allowed based on existing material. The tribunal observed that no new evidence was brought to justify the reopening of the assessment.

The tribunal referred to several judgments, including the Supreme Court's ruling in the case of Kelvinator India Ltd., which emphasized that reassessment requires "tangible material" indicating income escapement, not merely a change of opinion.

The ITAT highlighted that the assessee had fully disclosed all necessary details during the original assessment proceedings and that the Assessing Officer's reliance on pre-existing records for issuing the notice was insufficient grounds for reopening the case. Consequently, the tribunal quashed the reassessment notice, rendering the subsequent assessment order void.

This decision underscores the importance of the "full and true disclosure" provision in tax assessments and the requirement for fresh tangible evidence when reopening assessments beyond the statutory four-year period.

Bottom Line:

Reopening of assessment under Section 147 of the Income Tax Act, 1961 is not valid if it is based on pre-existing material without any fresh tangible evidence and beyond four years from the end of the relevant assessment year, unless there is failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.

Statutory provision(s): Section 147 of the Income Tax Act, 1961, Section 80IA of the Income Tax Act, 1961

Rupa Infotech & Infrastructure Pvt. Ltd. v. Dy. Commissioner of Income Tax, Circle 14(1)(2), Mumbai, (ITAT)(Mumbai "D" Bench) : Law Finder Doc Id # 2818845