2017 (4) TMI 1355 - AT - Income Tax

Reopening of assessment - AO has not applied his mind independently - Held that - From decision of the Assessing Officer while disposing of the reasons the report of the investigation wing is final for initiation of reassessment proceedings u/s.147 of the Act. It is evident that the Assessing Officer has not applied his mind independently to the fact of the case and in such circumstances of the case the Assessing Officer does not acquire any jurisdiction to assess or reassess the matter in the present case. AO does not acquire jurisdiction to assess or reassess the matter in the present case and accordingly the assessment / reassessment are directed to be quashed. - Decided in favour of assessee.

Summary

Issues:
1. Validity of reopening assessment under section 147
2. Addition of income by the Additional Director
3. Dismissal of Ground No. 2(b) of the Grounds Of Appeal
4. Disallowance under section 14A of the Income Tax Act
5. Adjustment of brought forward losses against current income

Validity of Reopening Assessment under Section 147:
The appeal challenged the validity of reopening the assessment under section 147 after four years. The Assessing Officer relied on an investigation report indicating accommodation entries received by the assessee. The reasons recorded were undated, and the notice was issued later. The assessee argued that the Assessing Officer did not apply his mind independently, citing the decision in Signature Hotels P. Ltd. vs. Income Tax Officer. The Tribunal agreed, stating that the AO lacked jurisdiction to reassess without independent verification, ultimately quashing the assessment/reassessment.

Addition of Income by the Additional Director:
The appeal contested the addition of ?24,03,120 by the Additional Director to the assessee's income. The reasons for this addition were related to unaccounted money ploughed back into the business through accommodation entries. The Tribunal reviewed the facts and arguments, ultimately allowing the legal ground raised by the assessee due to the lack of jurisdiction by the Assessing Officer, rendering the merit grounds irrelevant for adjudication.

Dismissal of Ground No. 2(b) of the Grounds Of Appeal:
The CIT(A) dismissed Ground No. 2(b) of the Grounds Of Appeal, confirming an addition of ?45,600 made by the AO. This addition was based on presumption during the assessment under section 143(3)/147. The Tribunal, however, focused on the lack of jurisdiction of the Assessing Officer in initiating reassessment proceedings, leading to the quashing of the assessment/reassessment.

Disallowance under Section 14A of the Income Tax Act:
The CIT(A) disallowed ?77,515 against ?61,580 under section 14A of the Income Tax Act. The Tribunal reviewed this disallowance in light of the overall lack of jurisdiction by the Assessing Officer, which led to the decision to quash the assessment/reassessment, rendering the specific disallowance irrelevant.

Adjustment of Brought Forward Losses Against Current Income:
The appeal raised concerns about the adjustment of brought forward losses against current income, alleging an error by the CIT(A) for not directing the AO to make this adjustment as per the law. However, the Tribunal's decision to quash the assessment/reassessment based on jurisdictional issues rendered this ground of appeal moot, as the legal ground was allowed due to the lack of Assessing Officer's jurisdiction.

In conclusion, the Tribunal allowed the appeal of the assessee based on the lack of jurisdiction of the Assessing Officer to reassess the matter, thereby quashing the assessment/reassessment and rendering the grounds on merit irrelevant for adjudication.