2019 (10) TMI 1290 - AT - Income Tax

Reopening of assessment u/s 147 - notice beyond the period of four years from the end of relevant assessment year - HELD THAT - The reading of the reasons placed by the assessee in the Paper Book shows that there is not even an allegation that there was any failure on the part of the assessee to disclose any material facts which lead to any income chargeable to tax had escaped the assessment. Even on the reading of the reasons recorded, it cannot be said that it suggests about any failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment. It is now well settled that the reasons which are recorded by the A.O. for reopening the assessment are the only reasons which can be considered and no substitution or deletion is permissible. The reasons which are recorded by the AO for reopening an assessment are the only reasons which can be considered when the formation of the belief is impugned. Reading of the reasons for re-opening of the assessment, it is seen that the notice has been issued and reassessment has been sought for verification of the cash and cheque transactions in the bank account of the assessee. In the present case, notice for re-opening of the assessment u/s 147 is not as per the mandate of Sec.147 and therefore the re-opening is not permissible. Notice issued for reopening has to be set aside and the same deserves to be quashed. Therefore quash the impugned re-assessment proceedings for A.Y. 2009-10 and thus, set aside the same. Ground No.1 of the assessee is allowed.

Summary

Issues:
1. Validity of re-assessment proceedings initiated by issuing notice u/s 148 of the Act.
2. Classification of income from cash deposits as income from other sources instead of income from house property.

Analysis:
Issue 1: Validity of re-assessment proceedings
The appellant challenged the re-assessment proceedings, arguing that the notice issued under section 148 of the Act was beyond the permissible time limit of four years and did not meet the condition of failure to disclose material facts necessary for assessment. The appellant contended that the re-opening of the assessment was solely for verification purposes, which is impermissible under the law. The appellant pointed out that the reasons recorded for re-opening did not allege any failure on their part to disclose material facts. The Tribunal emphasized that the Assessing Officer can re-open an assessment only if specific conditions under Section 147 of the Act are met, including the belief that income has escaped assessment and failure to disclose material facts. The Tribunal cited a precedent highlighting that re-opening cannot be done for mere verification purposes. Ultimately, the Tribunal held that the notice for re-opening the assessment was not in accordance with the law and quashed the re-assessment proceedings for the relevant assessment year.

Issue 2: Classification of income
The appellant also contested the classification of cash deposits as income from other sources instead of income from house property. The Tribunal, after declaring the re-assessment proceedings as void, deemed the issue on merits as academic and did not provide further adjudication on the classification of income. As a result, the appellant's ground challenging the treatment of income from cash deposits was allowed, but no specific ruling was made regarding the classification of income.

In conclusion, the Appellate Tribunal held that the re-assessment proceedings were invalid due to the notice for re-opening not meeting the legal requirements. The Tribunal also highlighted that the issue regarding the classification of income was rendered academic due to the invalidation of the re-assessment proceedings. Consequently, the appeal of the assessee was partly allowed, and the re-assessment proceedings for the relevant assessment year were quashed.