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2011 (1) TMI 192 - AT - Income TaxRe-opening of the assessments Income escaping assessment - reassessment was framed and A.O. re-computed the capital gains at Rs. 51,95,050 in the first round the reopening of the assessment was knocked down only for the reasons that the reasons recorded were not communicated to the assessee and the reopening was done when there was a time to issue a notice u/s 143(2) of the Act. There was no specific finding of the CIT(A) with regard to the sufficiency of reasons to form a belief that income chargeable to tax has escaped assessment. At the time of second reopening the defects which were pointed out by the CIT(A) in first round has been removed and the A.O. has reopened the assessment after forming a belief that income chargeable to tax has escaped assessment. No argument was raised with regard to the sufficiency of reasons hence it was not adjudicated upon by the CIT(A) - Reassessment held to be valid - matter restored before CIT(A).
Issues Involved:
1. Validity of the re-opening of the assessments. 2. Jurisdiction of the Assessing Officer (A.O.) to re-open the assessment for the second time. 3. Sufficiency of reasons for re-opening the assessment. Detailed Analysis: 1. Validity of the Re-opening of the Assessments: The primary issue in this appeal is the validity of the re-opening of the assessments. The assessee filed a return of income for the assessment year 2004-05, disclosing long-term capital gains. The return was processed under section 143(1). The A.O. later noticed that the assessee claimed additional expenses without corroborative evidence, leading to the belief that income chargeable to tax had escaped assessment. A notice under section 148 was issued, and the reassessment was framed. The CIT(A) annulled this re-assessment, holding the re-opening invalid due to the A.O.'s failure to supply the reasons for reopening and the premature invocation of section 147 when a notice under section 143(2) could still be issued. 2. Jurisdiction of the A.O. to Re-open the Assessment for the Second Time: The A.O. issued another notice under section 148 for the same assessment year, this time communicating the reasons for reopening. The assessee challenged this second re-opening on the grounds that it was based on the same reasons as the first, which had already been annulled by the CIT(A). The Tribunal examined whether the revenue has the jurisdiction to re-open the assessment a second time when the first re-opening was quashed on legal grounds without addressing the sufficiency of the reasons for forming the belief that income had escaped assessment. 3. Sufficiency of Reasons for Re-opening the Assessment: The Tribunal analyzed the relevant provisions of sections 147 and 148, which govern the re-opening of assessments. It was noted that there is no legal barrier preventing the revenue from re-opening an assessment a second time after forming a reasonable belief that income chargeable to tax has escaped assessment. The Tribunal also reviewed the judgments cited by the assessee but found that none categorically stated that a second re-opening is barred if the first was annulled on legal grounds without addressing the sufficiency of the reasons for re-opening. The Tribunal concluded that the first re-opening was annulled due to procedural defects (non-communication of reasons and premature invocation of section 147). These defects were rectified in the second re-opening, where the A.O. formed a belief that income had escaped assessment and communicated the reasons to the assessee. The Tribunal found that the second re-opening was valid and within the revenue's rights, as the sufficiency of the reasons for the first re-opening was never adjudicated. Conclusion: The Tribunal held that the second re-opening of the assessment was valid, as the procedural defects identified in the first re-opening were rectified, and there was no legal prohibition against a second re-opening. The matter was remanded to the CIT(A) to adjudicate the appeal on merit, as the CIT(A) had previously annulled the assessment on legal grounds without addressing the merits of the case. Result: The appeal of the revenue was allowed for statistical purposes, and the matter was restored to the file of the CIT(A) for adjudication on merit.
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