The Income Tax Appellate Tribunal (ITAT) in Hyderabad ruled that under the Income Tax Act, 1961, if a reassessment is conducted after a period of 4 years, it is mandatory for the Commissioner of Income Tax (CIT) to record their satisfaction. If this requirement is not met, the reassessment proceedings would be considered invalid.
In the case at hand "ACIT Vs ECI Engineering & Construction Co. Ltd", the taxpayer argues that the notice issued under section 148 was done so without obtaining the satisfaction of the CIT-II, Hyderabad / Central Board of Direct Taxes (CBDT). The taxpayer contends that the notice was issued as if the reopening of the assessment was being done within 4 years under clause (1) of section 147 of the Act. It is argued that if the reopening is carried out by the revenue authorities beyond a period of 4 years, the satisfaction of the Commissioner of Income Tax is necessary.
The conclusion drawn is that if the Assessing Officer has not mentioned that the assessee has failed to disclose all relevant and accurate information necessary for the completion of the assessment, the reopening of the assessment cannot be considered lawful. Therefore, the reopening conducted by the Assessing Officer is not in accordance with the law, and as a result, the subsequent assessment made by the Assessing Officer is also considered legally invalid.
Furthermore, it is observed that in the notice of reopening dated 28.03.2012, which is reproduced in paragraph 4.1 of the order, the Assessing Officer had deleted the part stating that the notice was issued after obtaining the necessary satisfaction from the CIT. This fact clearly indicates that at the time of issuing the notice, there was no satisfaction on record by the revenue authorities allowing the Assessing Officer to reopen the assessment beyond a period of 4 years. If such satisfaction had been available, there would be no reason for the Assessing Officer to remove the aforementioned information. Therefore, it can be concluded that the reopening was conducted beyond a period of 4 years without recording satisfaction by the CIT.
The ITAT held that for reassessment beyond a period of 4 years, it is mandatory for the Commissioner of Income Tax to record their satisfaction under the provisions of the Income Tax Act, 1961. Since this requirement was not fulfilled in the present case, the reopening of the assessment and the consequent assessment made by the Assessing Officer are considered legally flawed.
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