2018 (2) TMI 1780 - HC - Income Tax

Reopening u/s 147 - basis of substantial evidence brought on record - Held that - The impugned order holds that the order which was passed consequent to reassessment, has not confirmed the addition attributable to the reasonable belief of the Assessing Officer while issuing the reopening notice. The reassessment order has made an addition on an issue which is not a subject matter of the reasons recorded in support of the reopening notice as forming its reasonable belief that income chargeable to tax has escaped assessment The question as formulated becomes academic as our Court in Commissioner of Income Tax Vs. Jet Airways (I) Ltd. 2010 (4) TMI 431 - HIGH COURT OF BOMBAY while examining Explanation 3 to Section 147 as held that the AO has to necessarily assess / reassess the income which escaped assessment on the basis of the formation of the reasonable belief for opening the assessment. It is only on assessing / reassessing such income which has escaped assessment in the reasons recorded, would it be open to the AO to assess / reassess any other income, which came to his notice during the reassessment proceedings. However, in the absence of reassessing the income which escaped assessment and which was the basis for formation of belief in issuing the notice, the order passed on reassessment is bad in law. No substantial question of law

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal regarding reopening of assessment for Assessment Year 2004-05.

Analysis:
The appeal under Section 260A of the Income Tax Act, 1961 challenges the order of the Income Tax Appellate Tribunal (the Tribunal) dated 6th February, 2015, concerning Assessment Year 2004-05. The key question raised by the Revenue is whether the Tribunal was justified in holding that the reopening done by the Assessing Officer was not in accordance with Section 147 of the I.T. Act despite substantial evidence indicating otherwise. The Tribunal's order in favor of the respondent assessee highlighted the lack of reasonable belief in the Assessing Officer to issue the reopening notice for A.Y. 2004-05. Additionally, it noted that the reassessment order did not confirm the addition based on the reasonable belief for reopening, instead making an addition on an issue not covered in the reasons recorded for reopening.

The judgment references the case of Commissioner of Income Tax Vs. Jet Airways (I) Ltd. 331 ITR 236, which clarified that the Assessing Officer must assess/reassess the income that escaped assessment based on the reasonable belief for reopening. Failure to reassess the income that formed the basis for reopening renders the reassessment order invalid. Consequently, the question raised by the Revenue was deemed academic, as per the court's interpretation of Explanation 3 to Section 147 of the Act.

The court concluded that the question did not present a substantial question of law and, therefore, was not entertained. Subsequently, the appeal was dismissed, with no order as to costs. The judgment underscores the importance of the Assessing Officer reassessing the income that led to the reopening of assessment to ensure the validity of the reassessment order under the Income Tax Act.