2012 (6) TMI 258 - AT - Income Tax

Reopening of the assessment - original assessment for assessment year 1992-93 was completed in this case on 31-3-1995 by making addition of Rs. 80 lakhs received by the assessee Held that - no finding or directions have been issued in assessment year 1992-93 to tax the same income in the assessment year under appeal which is also inherently impossible in view of the findings that it is capital receipt. provisions of section 150 of the Income-tax Act would not apply in the case of the assessee and since the reopening of the assessment is made after a period of six years from the end of the assessment year as per section 149 of the Income-tax Act, therefore, it is clearly time-barred. it is finally decided between the parties that such a receipt is a capital receipt; therefore, no income chargeable to tax would have escaped assessment. no addition of Rs. 80 lakhs can be made in the hands of the assessee. appeal of the assessee is allowed

Issues Involved:
1. Reopening of assessment under section 147 read with section 150(1) of the Income-tax Act.
2. Confirmation of addition of Rs. 80,00,000 as taxable income.

Detailed Analysis:

1. Reopening of Assessment under Section 147 read with Section 150(1) of the Income-tax Act:

The primary issue revolves around the reopening of the assessment for the assessment year 1994-95. The original assessment for the assessment year 1992-93 included an addition of Rs. 80 lakhs received by the assessee from Neumatic Marketing Company. The CIT(A) deleted this addition, stating that the receipt did not accrue in the assessment year 1992-93 but in the assessment year 1994-95, and that the receipt was capital in nature. The ITAT and the Gujarat High Court upheld this view without giving any finding on the nature of the receipt.

The Assessing Officer (AO) issued a notice under section 148 read with section 150 of the Income-tax Act on 14-3-2007, claiming that the income chargeable to tax for the assessment year 1994-95 had escaped assessment. The assessee contested this, arguing that there was no finding or direction regarding the taxability of the income for the assessment year 1994-95 in any appellate order. The AO, however, maintained that the Gujarat High Court's observation that the receipt pertained to the assessment year 1994-95 constituted a finding within the meaning of section 150(1).

The CIT(A) upheld the reopening of the assessment under section 147 read with section 150(1), citing various case laws and emphasizing that the appellate authorities had held that the receipt pertained to the assessment year 1994-95, which was a "finding." The CIT(A) relied on Explanation 2 to section 153, which states that if any income is excluded from the total income of an assessee for an assessment year, then its assessment for another year shall be deemed to be made in consequence of any finding or direction contained in the appellate order.

The assessee argued that the reassessment for the assessment year 1994-95 was time-barred as it was initiated after six years from the end of the relevant assessment year. The CIT(A) dismissed this argument, stating that the provisions of section 150(1) allowed for the reopening of the assessment beyond the normal time limits due to the findings in the appellate orders.

2. Confirmation of Addition of Rs. 80,00,000 as Taxable Income:

The CIT(A) also confirmed the addition of Rs. 80 lakhs, holding it to be a trading receipt and taxable income. The assessee contended that the CIT(A) in the assessment year 1992-93 had held that the income neither accrued nor was received in that year and that it was a capital receipt, not a revenue receipt. The assessee argued that there were no findings or directions in the appellate orders to tax the income in the assessment year 1994-95.

The Tribunal found that the CIT(A) in the assessment year 1992-93 had indeed held that the receipt was not revenue in nature but a capital receipt. The Tribunal noted that the findings of the CIT(A) had reached finality, as the revenue did not pursue the matter further. The Tribunal also observed that the appellate orders did not contain any findings or directions to tax the income in the assessment year 1994-95.

The Tribunal concluded that the reopening of the assessment was based on non-existing reasons and that the reassessment proceedings were time-barred under section 149(1)(b). The Tribunal emphasized that mere remarks or observations in appellate orders could not be construed as findings or directions within the meaning of section 150(1). The Tribunal quashed the reassessment proceedings and deleted the addition of Rs. 80 lakhs.

Conclusion:

The Tribunal allowed the assessee's appeal, setting aside the orders of the authorities below, quashing the reassessment proceedings under section 147 read with section 150, and deleting the addition of Rs. 80 lakhs. The Tribunal held that the reopening of the assessment was invalid as it was based on non-existing reasons and was time-barred. The Tribunal also affirmed that the receipt in question was a capital receipt, not a revenue receipt, and thus not chargeable to tax.

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