2018 (9) TMI 1865 - AT - Income Tax

Reopening of assessment u/s. 147 - validity of reason to believe - HELD THAT - Reasons recorded clearly shows that there was no new tangible material in the hands of AO at the time of initiating reassessment proceedings u/s. 147 and at the time of issuing notice u/s. 148 therefore, it is a clear case of change of opinion on the same material which was before the AO at the time of original assessment proceedings. No hesitation to hold that the AO did not assume valid jurisdiction to initiate reassessment proceedings and to issue notice u/s. 148 as there was no new tangible material with the AO at the time of initiating said proceedings. Therefore hold that the initiation of reassessment proceedings and issuance of notices u/s. 148 and all subsequent proceedings in pursuant thereto are bad in law being initiated without having valid jurisdiction and the same deserve to be quashed and we hold so. Accordingly, legal Ground No.1 of the assessee is allowed and consequently, initiation of reassessment proceeding u/s. 147 of the Act and notice u/s. 148 of the Act along with all subsequent proceedings and orders are quashed.

Summary

Issues:
1. Validity of reopening of assessment under section 147 of the Income Tax Act.
2. Addition of ?1,92,000 made by the Assessing Officer under section 143(1) of the Act.

Issue 1: Validity of Reopening of Assessment under Section 147:

The appeal was filed against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2007-08. The Assessee challenged the reopening of assessment under section 147 of the Income Tax Act. The Assessee argued that there was no new material with the Assessing Officer (AO) at the time of initiating reassessment proceedings, indicating a change of opinion on existing material. The Departmental Representative contended that a cash payment made by the Assessee should have been disallowed under section 40A(3) of the Act, resulting in a tax shortfall. The Tribunal analyzed the reasons recorded by the AO and found no new tangible material to justify the reassessment proceedings. Consequently, the Tribunal held that the AO lacked valid jurisdiction to initiate reassessment proceedings and issue notice under section 148 of the Act. Therefore, the initiation of reassessment proceedings and all subsequent actions were deemed invalid and quashed.

Issue 2: Addition of ?1,92,000 under Section 143(1) of the Act:

As the Tribunal quashed the initiation of reassessment and subsequent proceedings, the issue regarding the addition of ?1,92,000 made by the AO under section 143(1) became moot and was not adjudicated. The Tribunal, having allowed the Assessee's appeal on the grounds of invalid initiation of reassessment, did not delve into the merits of the case concerning the addition. Consequently, the appeal of the Assessee was allowed, and the Tribunal pronounced the order in favor of the Assessee on 25th September 2018.

This detailed analysis of the judgment highlights the key issues regarding the validity of the reassessment proceedings and the subsequent addition made by the Assessing Officer, providing a comprehensive overview of the legal arguments and the Tribunal's decision.