2013 (3) TMI 814 - AT - Income Tax

Summary

Issues involved: Jurisdictional issue of reopening assessment u/s. 147 of the Income-tax Act, 1961.

The Appellate Tribunal ITAT Kolkata heard an appeal by the assessee against the order of CIT(A)-XIV, Kolkata for Assessment Year 2002-03. The assessment was framed by ACIT, Circle-23, Kolkata u/s. 147/143(3)/252 of the Act. The first legal issue regarding the assessment order's limitation was not pressed by the assessee and was dismissed. The second jurisdictional issue raised was about the reopening of assessment u/s. 147 of the Act, contending that the reasons for reopening were recorded after the notice u/s. 148, making the reopening bad in law. The assessee argued that the reassessment was unjustified as the reasons for initiation of proceedings ceased to survive. The reasons recorded for the notice u/s. 148 highlighted discrepancies in the assessee's income and investments, leading to the belief that income had escaped assessment.

During the hearing, the assessee's counsel pointed out that the AO had made disallowances under section 14A of the Act, but the reasons for reassessment were based on interest deduction from salary income. The Tribunal noted that the AO's reasons for issuing the notice u/s. 148 were different from the actual disallowances made. It emphasized the importance of fulfilling the conditions under sections 147 and 148 for reassessing escaped income. The Tribunal held that the AO must have jurisdiction to reassess issues other than those for which proceedings were initiated, but only if the reasons for initiation ceased to exist. Citing relevant case laws, the Tribunal allowed the appeal in favor of the assessee on the jurisdictional issue, stating that once this issue was resolved, there was no need to address the remaining issues on merits.

Judgment: The Appellate Tribunal ITAT Kolkata allowed the appeal of the assessee, concluding that the reassessment u/s. 147 of the Act was unjustified due to discrepancies in the reasons for initiation and the actual disallowances made. The Tribunal emphasized the necessity for the AO to have jurisdiction to reassess issues and held that once the reasons for initiation of proceedings ceased to exist, reassessment on new issues was not permissible. The appeal was allowed solely on the jurisdictional issue, rendering further adjudication on merits unnecessary.