2015 (3) TMI 231 - AT - Income Tax

Reopening of the assessment u/s 147/148 - Change of opinion - Held that - Commissioner of Income Tax has called for the record of this assessment order dated 05.10.2007 and after show causing the assessee u/s 263, had found the order not only erroneous but also prejudicial to the interest of the revenue and had directed the A.O. to revise his order. But the A.O. failed, inadvertently, to give effect to the revisional directions and the same became time barred. This fact has remained uncontroverted, rather, is found to be correct. Having found that, we have further noticed that the A.O. has issued notice u/s 148 after recording same reasons as were the grounds of revision in the notice issued u/s 263 of the Act by the Commissioner. Thus, it becomes clear that with the object of correctlinghis mistake the A.O. has taken the route of re-assessment. We have found it for a fact that no new material came to the possession of the A.O. The assessee had disclosed all the facts of his case fully and truly. No authority can be allowed to take a benefit of its mistakes. The provisions of the Act are very clear. These are not to be carried out simultaneously. It would amount to misuse of the provisions of the Act in case we accept the contention of ld. D.R. that the A.O. can put into use all the provisions of the act at his sweet will. This is not the intention of the legislation. The A.O. has, in fact, not applied his mind to form his opinion regarding the escapement of income. - notice issued u/s 148 in this case as invalid and quash the re-assessment order being ab-initio void - Following decision of CIT vs M/s. Vardhman Industries 2014 (6) TMI 223 - RAJASTHAN HIGH COURT - Decided in favour of assesse.

Issues Involved:
1. Validity of reopening of assessment under section 147/148 of the Income Tax Act, 1961.
2. Addition of provisions of service tax.
3. Addition of unexplained liabilities under section 68 of the Income Tax Act, 1961.
4. Addition of remission or cessation of liabilities under section 41(1) of the Income Tax Act, 1961.
5. Decision of charging interest.

Issue 1: Validity of Reopening of Assessment (Section 147/148):
The appellant challenged the reopening of the assessment under section 147/148 of the Income Tax Act, 1961, citing the judgment of the Hon'ble Supreme Court in the case of M/s G.K.N. Derive Shafts (India) Ltd. The appellant argued that the Assessing Officer (A.O.) had passed the original order under section 143(3) after considering all incomes and taking a possible view, and no new material was available to warrant the reopening. The appellant contended that the notice under section 148 was based on a change of opinion due to the A.O.'s failure to comply with directions from the Commissioner. The Tribunal found that the A.O. had failed to give effect to the Commissioner's revisional order, leading to the reassessment. It was established that no new material was presented, and the A.O. had not applied his mind independently. Relying on legal precedents, the Tribunal held the notice under section 148 invalid, quashing the reassessment order as ab initio void, and ruled in favor of the assessee.

Issue 2: Addition of Provisions of Service Tax:
The appellant contested the addition of Rs. 5,27,396 made on account of provisions of service tax. The Tribunal did not delve into this issue as the primary concern of the validity of reopening the assessment was already decided in favor of the assessee, rendering further discussion on this ground unnecessary.

Issue 3: Addition of Unexplained Liabilities (Section 68):
The appellant disputed the addition of Rs. 17,50,657 made by the A.O. on account of unexplained liabilities under section 68 of the Income Tax Act, 1961. However, due to the Tribunal's decision on the validity of the reopening, no detailed analysis or ruling was provided on this specific issue.

Issue 4: Addition of Remission or Cessation of Liabilities (Section 41(1)):
The appellant challenged the addition of Rs. 16,33,602 made by the A.O. on account of remission or cessation of liabilities under section 41(1) of the Income Tax Act, 1961. Since the Tribunal had already held the notice under section 148 as invalid, this issue was not addressed separately, and the decision in favor of the assessee covered this ground as well.

Issue 5: Decision of Charging Interest:
The appellant objected to the decision of charging interest. However, given the Tribunal's ruling on the primary issue of the validity of reopening the assessment, no specific analysis or ruling was provided on this matter as the assessee's appeal was allowed based on the invalidity of the notice under section 148.

In conclusion, the Appellate Tribunal ITAT Jodhpur ruled in favor of the assessee, allowing the appeal for the assessment year 2005-06. The Tribunal held the notice issued under section 148 as invalid, quashing the reassessment order and rendering further discussions on other grounds unnecessary.

← Previous Next →