2015 (3) TMI 985 - HC - Income Tax

Reopening of assessment - whether Tribunal erred in quashing the proceedings u/s 147 ignoring the fact that the reassessment was made by the Assessing Officer under Section 150 where a reassessment is required to be made in pursuance of a direction by the CIT(A)? - Held that - The reasons as recorded in support of the reopening notice dated 10 February 2003 merely states that loans were taken by some companies but that does not indicate in what manner those loans would be hit by the provisions of deemed dividend. The reasons must indicate live link between the material and the belief. (see ITO Vs. Lakhmani Mewal Das 1976 (3) TMI 1 - SUPREME Court and CIT Vs. Kelvinator India Ltd. 2010 (1) TMI 11 - SUPREME COURT OF INDIA ). The material here is that the respondent assessee has received a loan from three private limited companies but that by itself does not make it deemed dividend leading to reason to believe that income chargeable to tax has escaped assessment. Moreover, we also notice that the Assessing Officer in issuing the notice dated 7 March 2000 has acted at the directions of the CIT(A). This seems to be an admitted position. This is more than evident from Question 1 as formulated by the revenue hereinabove which states that the assessing officer was required to carryout the reassessment in view of the Section 150 of the Act i.e. in pursuance of the direction by the CIT(A). This itself an indication of the assessing officer acting as per the direction of the CIT(A) in issuing the impugned notice. Whether the Tribunal was justified in quashing the proceedings u/s 147 without considering that the return had been merely processed u/s 143(1)(a) ? - Held that - It is a settled position in law that even though the assessment has been processed under Section 143 (1)(a) of the Act for the purposes of reopening of assessment, the condition stipulated for invoking jurisdiction under Section 147/148 of the Act has to be satisfied. In view of the above, we see no reason to entertain the present appeal as the Tribunal by the impugned order has correctly held that the notice for reopening dated 10 February 2003 was without jurisdiction. No reason to entertain the present appeal as the Tribunal by the impugned order has correctly held that the notice for reopening dated 10 February 2003 was without jurisdiction. - Decided against revenue.

Summary

Issues:
1. Validity of reopening assessment under Section 147 of the Income Tax Act, 1961 for Assessment Year 1996-97.

Analysis:
The High Court of Bombay heard an appeal challenging the order of the Income Tax Appellate Tribunal (the 'Tribunal') which allowed the respondent/assessee's appeal for Assessment Year 1996-97. The appellant/revenue raised questions of law regarding the justification of quashing the proceedings under Section 147 of the Act. The brief facts revealed that the assessing officer had issued a notice under Section 148 to reopen the assessment for the mentioned year based on certain loans received by the assessee company. The Commissioner of Income Tax (Appeals) (the 'CIT(A)') had earlier quashed the assessment order, leading to a fresh notice under Section 148 in 2003. Despite objections from the respondentassessee, the Assessing Officer proceeded with the reassessment, resulting in an appeal to the Tribunal.

The Tribunal allowed the respondent/assessee's appeal, citing reasons that the reopening notice lacked a sufficient link between the material and the belief that income had escaped assessment. The Court emphasized the necessity for a live link between the material and the belief, referencing legal precedents. It was noted that the Assessing Officer had acted at the direction of the CIT(A) in issuing the notice, indicating a lack of independent assessment. The Court highlighted that the conditions for invoking jurisdiction under Section 147/148 of the Act must be met, even if the assessment had been processed under Section 143(1)(a).

Ultimately, the Court upheld the Tribunal's decision, ruling that the notice for reopening the assessment in 2003 was without jurisdiction. The appeal was dismissed, with no order as to costs. The judgment emphasized the importance of meeting legal requirements for reopening assessments under the Income Tax Act, ensuring a valid and justified basis for such actions.