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2014 (2) TMI 310 - AT - Income TaxAssessment u/s 143(3) r.w.s. 147 - Held that - The AO had reopened the assessment only on the ground that the scrutiny assessment under section 143(3) of the Act was set aside by the higher authorities - Once the assessment under section 143(3) has been annulled by the higher authorities, reopening under section 147 on that very ground would mean abuse of process of law - The annulment of assessment done under section 143(3) by the higher judicial authorities, itself, cannot be a ground for reopening - If the AO comes into the knowledge of any new material from which he has reason to believe that certain income of the assessee has escaped assessment, he can reopen the assessment - The order of CIT(A) upheld - Decided against Revenue.
Issues Involved:
1. Jurisdiction of Assessing Officer under section 147 read with section 148 for reopening assessment. 2. Validity of reassessment proceedings based on incriminating material found during survey action. 3. Application of "reason to believe" for reopening assessment under section 147. 4. Legality of reopening assessment after annulment under section 143(3). Analysis: Issue 1: Jurisdiction of Assessing Officer for Reopening Assessment The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) setting aside the assessment order framed by the Assessing Officer (AO) under section 143(3) read with section 147. The AO reopened the assessment under section 147 based on the belief that income had escaped assessment due to lack of full disclosure by the assessee during the original assessment proceedings. The Tribunal observed that the mere annulment of assessment under section 143(3) by higher authorities cannot be the sole ground for reopening under section 147. The AO must have specific, reliable, and relevant information to believe income has escaped assessment. In this case, the Tribunal held that the AO lacked jurisdiction in reopening the assessment solely based on the annulment of the previous assessment. Issue 2: Validity of Reassessment Proceedings Based on Survey Action The AO initiated reassessment proceedings based on incriminating documents found during a survey action at the business premises of the assessee. The AO concluded that the assessee had suppressed actual sales, leading to the addition of certain income. However, the Tribunal noted that no incriminating material relevant to the assessment year under consideration was found during the survey. The Tribunal emphasized that the additions made by the AO were not sustainable as they were based on assumptions and lacked merit, especially since similar additions for a different assessment year had been set aside by the jurisdictional High Court. Issue 3: Application of "Reason to Believe" for Reopening Assessment The Tribunal emphasized that for reopening an assessment under section 147, the AO must have a valid "reason to believe" that income has escaped assessment. Mere suspicion or subjective satisfaction of the AO is not sufficient. The Tribunal held that the AO must base the reopening on specific material or evidence, not on subjective estimates. In this case, the Tribunal found that the AO did not have any new material or evidence to justify the reopening, leading to a lack of jurisdiction in the reassessment proceedings. Issue 4: Legality of Reopening Assessment After Annulment under Section 143(3) The Tribunal reiterated that the annulment of an assessment under section 143(3) by higher authorities cannot be the sole ground for reopening under section 147. The AO must have valid reasons backed by specific material to believe income has escaped assessment. Reopening an assessment without new material or evidence is not permissible. The Tribunal dismissed the appeal filed by the Revenue, emphasizing that the reassessment lacked jurisdiction and merit, ultimately upholding the decision of the Commissioner of Income Tax (Appeals) in setting aside the assessment order. This detailed analysis highlights the key legal aspects and reasoning behind the judgment delivered by the Appellate Tribunal ITAT MUMBAI, providing a comprehensive understanding of the issues involved and the Tribunal's decision in this case.
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