2009 (10) TMI 904 - AT - Income Tax

Summary

Issues Involved:
1. Legality of the invocation of provisions u/s 147.
2. Discharge of burden regarding payment of Rs. 75 lakhs to M/s Dalmia Industries Ltd.
3. Chargeability of interest u/s 234B.
4. Validity of notice issued u/s 147 and 148.
5. Material for reopening of assessment.

Summary:

1. Legality of the invocation of provisions u/s 147:
The assessee contended that the CIT(A) erred in upholding the invocation of provisions u/s 147, arguing that the AO had no jurisdiction to frame the reassessment as the basis for reopening was non-existent. The Tribunal found that the AO did not have sufficient material to form a belief that any income had escaped assessment. The reasons recorded by the AO were based on suspicion and instructions from the Addl. CIT, without an independent application of mind. Therefore, the reopening of the assessment was deemed bad in law.

2. Discharge of burden regarding payment of Rs. 75 lakhs to M/s Dalmia Industries Ltd.:
The assessee argued that the CIT(A) erred in holding that the appellant had not discharged its burden regarding the payment of Rs. 75 lakhs as introduction charges. The Tribunal noted that this ground did not require fresh investigation of facts and was not admitted as a legal ground.

3. Chargeability of interest u/s 234B:
The assessee contended that the CIT(A) erred in upholding the chargeability of interest u/s 234B, arguing that the appellant was not liable to pay advance tax u/s 208. The Tribunal did not specifically address this issue in the judgment.

4. Validity of notice issued u/s 147 and 148:
The assessee raised additional grounds challenging the validity of the notice issued u/s 147 and 148, arguing that no reasons were recorded prior to the issuance of notice and that the reasons to believe were illegal and bad in law. The Tribunal found that the AO did not have a prima facie belief that any income had escaped assessment and that the reasons recorded were based on suspicion. Therefore, the notice issued u/s 148 was deemed illegal and without jurisdiction.

5. Material for reopening of assessment:
The Tribunal found that there was no fresh material or information on which the AO could have formed the belief that income had escaped assessment. The AO's reasons for reopening the assessment were based on suspicion and instructions from the Addl. CIT, without an independent application of mind. The Tribunal held that the AO was not justified in making any addition without any material or information, and the assessment was quashed.

Conclusion:
The Tribunal quashed the assessment, allowing the appeal filed by the assessee in part and dismissing the appeal of the Department. The Tribunal did not dispose of the grounds on merit involved in the appeal of the assessee and the Department.