ITAT Raipur Invalidates Reopening Beyond Four Years Where No Disclosure Failure Is Recorded

1. Overview of the Decision

The Raipur Bench of the Income Tax Appellate Tribunal, in the case of Hi Tech Power and Steel Limited Vs Central Circle (ITAT Raipur), annulled a reassessment framed under Section 143(3) read with Section 147 for AY 2012-13. The core ground was jurisdictional: the reopening notice under Section 148 issued on 30/03/2019 was beyond four years from the end of the relevant assessment year, yet the recorded reasons did not assert that there was any failure on the part of the assessee to make a full and true disclosure of all material facts.

The reassessment involved additions aggregating to ₹7.35 crore related to share application money and share premium. The CIT(A) had:

Sustained an addition of ₹3.70 crore; and
Deleted an addition of ₹3.65 crore.

This led to cross-appeals before the Tribunal:

The assessee contested the validity of reopening and the sustained addition of ₹3.70 crore;
The Revenue challenged deletion of ₹3.65 crore linked to investment by Shree Sharda Tradecom Pvt. Ltd.

Once the Tribunal concluded that the reassessment itself was void ab initio on account of non-compliance with the first proviso to Section 147, the Revenue’s appeal automatically became infructuous. The Tribunal, therefore, did not adjudicate the substantive Section 68 issues relating to the genuineness of share capital or the implications of the Vivad Se Vishwas Act, 2020.

2. Background: Original Scrutiny Assessment

2.1 Filing of Return and Initial Scrutiny

For AY 2012-13, the assessee filed its return of income on 06/09/2012, declaring total income of ₹2,19,45,360. The case was selected for complete scrutiny and proceedings were conducted by the then Joint Commissioner of Income Tax, Range-2, Raipur.

The original assessment was completed under Section 143(3) on 30/05/2014. The assessed income was determined at ₹2,24,83,203, involving a marginal enhancement of ₹5,37,843 on account of disallowance of certain expenditures. Importantly, no addition was made in respect of share capital or share premium in this original order.

During the original scrutiny, the Assessing Officer had issued a detailed notice under Section 142(1) dated 22/01/2014. One crucial query sought:

“Please furnish name & complete address of the persons from whom share application money/security premium amount was received. Please furnish the relevant information also.”

The assessee stated that it had:

Furnished full particulars of share applicants and share premium;
Produced its books of account; and
Submitted audited financial statements.

No adverse finding was recorded in the original assessment order regarding share capital or share premium. Hence, those issues attained finality at that stage.

3. Reopening Proceedings Under Section 147

3.1 Notice under Section 148 and Reassessment Order

Subsequently, the ACIT, Circle 2(1), Raipur issued a notice under Section 148 dated 30/03/2019 for AY 2012-13. This notice was admittedly issued:

After completion of a Section 143(3) assessment; and
Beyond four years from the end of AY 2012-13.

The assessee filed a return in response on 13/04/2019 declaring income of ₹2,21,89,630, and a Section 143(2) notice followed on 05/07/2019. The reassessment order under Section 143(3) read with Section 147 was passed on 30/12/2019, making an addition of ₹7.35 crore towards share application money and premium received from:

Shree Sharda Tradecom Pvt. Ltd. – ₹3,85,00,000
DKS Tradcom Pvt. Ltd. – ₹3,50,00,000

3.2 Recorded Reasons for Reopening

The reasons recorded for issuance of the notice under Section 148, as reproduced in the reassessment order, were grounded on information from the Investigation Wing. In brief, the Assessing Officer noted:

ITAT Raipur on Reassessment Beyond Four Years: Absence of Disclosure Failure Allegation Is Fatal