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2015 (9) TMI 263 - AT - Income TaxReopening of assessment - difference of ₹ 5,79,332 in the gross receipts reflected in the TDS certificates, vis-avis the gross receipts as per in the Profit & Loss Account - Held that - In the present case before us, since no additions were made in relation to the grounds for which the assessment was reopened, the scope of additions cannot be enlarged to include incomes which are not within the realm of the re-opening of the assessment. The reopening of the assessment, as per the reasons recorded for that purpose, was only in relation to reconciliation of receipts shown in the TDS certificates and the receipts credited in Profit & Loss Account, and hence, following the decision of the Bombay High Court in the case of Jet Airways (2010 (4) TMI 431 - HIGH COURT OF BOMBAY ), we find that the impugned re-assessment made by the Assessing Officer cannot be upheld. As decided in case of Meheria Reid & Co. Vs. ITO, 2013 (2) TMI 348 - ITAT KOLKATA a variation in the two figures does not necessarily lead to escapement of income Mere need to verify the discrepancy does not bring the matter within the scope of cases in which reassessment proceedings can be validly initiated There is subtle, though significant, distinction between reason to believe and reason to suspect While the former is good enough to hold that income has escaped assessment and initiate suitable remedial measures in respect thereof, the latter can, at best, be the ground to verify and examine the matter further Mere fact that matter needs to be verified and examined further can never be a reason good enough to believe that income has escaped assessment and to invoke the reassessment proceedings. Thus we cancel the re-assessment made under S.14(3) read with S.147 - Decided in favour of assessee.
Issues:
1. Validity of reopening the assessment under Section 148 of the Income Tax Act. 2. Legality of estimating income at 8% on turnover. 3. Scope of additions in reassessment proceedings. 4. Nexus between reasons for reopening assessment and final assessment. Issue 1: Validity of reopening the assessment under Section 148: The appellant contested the legality of the assessment reopening based on a difference in gross receipts between TDS certificates and Profit & Loss Account. The Assessing Officer believed income had escaped assessment. The CIT(A) upheld the reopening, citing the need to prove the correctness of book results. The appellant argued the reopening lacked jurisdiction, citing precedents. The Tribunal referred to legislative intent and held that the reassessment was invalid due to lack of nexus between reasons and final assessment. Issue 2: Legality of estimating income at 8% on turnover: The CIT(A) estimated income at 8% of gross receipts, differing from the Assessing Officer's 10% estimate. The Tribunal, following a Special Bench decision, restricted the estimation to 8%, directing the re-calculation of income. The appellant challenged this estimation, leading to the appeal. Issue 3: Scope of additions in reassessment proceedings: The appellant argued that since no additions were made on the grounds for reopening, the scope of additions couldn't be broadened. The Tribunal referred to precedents emphasizing that new issues require fresh notices under Section 148. As no additions were made related to the reopening grounds, the Tribunal held that the reassessment couldn't include unrelated incomes. Issue 4: Nexus between reasons for reopening assessment and final assessment: The appellant raised concerns about the nexus between the reasons for reopening and the final assessment. The Tribunal referred to precedents highlighting the need for a direct link between the reasons and the assessment. Citing a lack of evidence of income escapement, the Tribunal quashed the reassessment under Section 147, favoring the appellant's grounds. In conclusion, the Tribunal allowed the appeal, setting aside the CIT(A)'s order and canceling the reassessment made by the Assessing Officer. The Tribunal emphasized the importance of a clear connection between the reasons for reopening an assessment and the final assessment, ensuring that additions are relevant to the grounds for reopening.
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