ITAT: Case Cannot Be Reopened After Four Years If Supplier Fails To Pay GST

ITAT: Case Cannot Be Reopened After Four Years If Supplier Fails To Pay GST

The assessment was already completed under Section 143(3) of the Income Tax Act in 2016

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that a case cannot be reopened after four years of the relevant Assessment Year (AY). This is unless an income chargeable to tax escaped assessment due to the assessee’s failure to disclose all material facts.

The Coram of Amit Shukla (Judicial Member) and Gagan Goyal (Accountant Member) noted that the assessment was already completed under Section 143(3) of the Income Tax Act, 1961, by the 20 March 2016 order.

However, the case was reopened on some Income Tax Business Application (ITBA) databases wherein the parties from whom the assessee made purchases were found to be non-filers of the Goods and Services Tax (GST).

Based on the information, the assessment was reopened under Section 148 to make the addition on purchases already examined earlier as part of the trading amount.

The appellant-assessee is a real estate developer building affordable housing for homebuyers. It declared the total income and the assessment was completed, accepting the trading results, purchases, and sales.

But the case was reopened based on the revenue department’s contention that payments to parties were made on fake bills. The purchases were made from Shah Steel Corporation and Swarn Rerolling Mill Pvt. Ltd.

From the information in the public domain, the department noted that these entities were non-filers. Thus, the purchases made by them were bogus.

The assessee’s objection to reopening the matter was disposed of by the AO, who held that the assessee did not furnish substantial evidence to prove the genuineness of the transactions. Therefore, the entire purchase was added by the AO.

However, the ITAT allowed the assessee’s appeal and held that the time limit for reopening and the assessment as applicable at the time of issuance of the reassessment notice, was three years from the end of the relevant AY.

The tribunal added that the time limit of 10 years could not be provided unless the AO had in his possession the books of account or other documents or evidence. He must reveal that the income chargeable to tax, represented as an asset, escaped assessment amounts for Rs.50,00,000 or more that year. But he had no such documentary evidence.