2013 (5) TMI 612 - HC - Income Tax

Reopening of assessment - commission income was not declared in the return of income filed by the assessee - extended period of limitation invoked - a list was sent by the Additional Director of Investigation-VI, New Delhi revealed that the assessee had provided a large number of accommodation entries to other beneficiaries from its bank account - ITAT quashed reassessment proceedings - review petition - Held that - Once it is conceded on behalf of the revenue that the list was not produced before this Court at the time of the hearing of the appeal and is only being produced along with the review petition after locating the same in other files subsequently, then there is no merit in the review petition. This Court had perused the reasons recorded but the list was not found to be part of the assessment record which was seen by this Court. This Court had also noted shockingly that the assessment record did not contain even the forwarding letter alleged to have been written by the ADIT to the assessing officer. It was open to the revenue to produce the list when the appeal was heard by this Court, though it would have been even then a matter of debate as to whether, in the absence of the list in the assessment record of the assessee, the reasons for reopening the assessment can be said to have been properly recorded by relying on a list which is not found in the assessment record. The prime requirement for the validity of a notice issued under section 148 is that the reasons recorded should have a live link or nexus with the material on record. This Court on an examination of the assessment record did not find therein the list on the basis of which the reasons were recorded. No merit in the review petition

Summary

Issues:
Review of judgment dismissing appeal against reassessment proceedings under section 147 of the Income Tax Act.

Analysis:
1. The petition filed by the revenue sought a review of the judgment dismissing their appeal against the order passed by the Income Tax Appellate Tribunal, which set aside the reassessment proceedings initiated under section 147 of the Act as being without jurisdiction.

2. The assessing officer reopened the assessment for the assessment year 2001-02 on the ground that income chargeable to tax had escaped assessment. This was based on information received regarding accommodation entries provided by the assessee to beneficiaries, leading to unexplained cash deposits in the bank account. The assessing officer issued a notice under section 148 of the Act for reopening the assessment.

3. An amount was added under section 68 in the reassessment proceedings, which the assessee challenged before the CIT(Appeals) and then the Tribunal.

4. The Tribunal found that the assessing officer did not have jurisdiction to reopen the assessment as the reasons recorded did not show failure by the assessee to disclose all material facts necessary for assessment. The Tribunal also noted that the quantum of income which escaped assessment was not specified in the reasons, leading to the allowance of the assessee's appeal.

5. The revenue appealed to the High Court, which observed discrepancies in the reasons recorded for reopening the assessment. The Court found that the list referred to by the assessing officer was not part of the assessment record, raising doubts about the sufficiency of reasons to believe for issuing the notice under section 148.

6. In the review petition, it was claimed that the list of beneficiaries did exist and was sent to the assessing officer, but it was not produced before the Court during the appeal. The Court emphasized the importance of the list having a live link or nexus with the material on record, which was lacking in this case. The review petition was dismissed for lack of merit.

This detailed analysis covers the issues involved in the legal judgment comprehensively, highlighting the key arguments and decisions made by the authorities involved.