2019 (2) TMI 1921 - AT - Income Tax

Reopening of assessment u/s 147 - Report received from Investigation Wing regarding share capital being received from the two companies - HELD THAT - Assessee has received share capital from Geefcee Finance Ltd. and from Mahanivesh (India) Ltd. It has filed confirmation, bank Financial Stock statement, ITR and Audited Financial Stock statement of both these companies. The assessment thereafter was completed under section 143(3) of the Act by the AO vide order dated 27.12.2007 meaning thereby the AO has accepted the contention of the assessee. Thereafter the assessment was reopened by issue of notice under section 148 of the Act. After reopening of assessment the AO has not made any further inquiry. In fact, in the assessment order after making a reference to the report received from investigation wing, the AO has not stated anything particular to the assessee. The AO has also not commented adversely on any of the document available on record regarding these two companies. In view of these facts, the document submitted by the assessee were not rebutted by the AO. It is noted that the reliance placed by the AR on the various judgments supports the case of the assessee whereby it has been held that in the absence of any inquiry made by the AO the addition on this account can t be sustained. In the present case falls in the other category as the assessment order is silent about the documents available on record in support of the share capital received by the appellant company. We find that there is no adverse observations or comment about the document available on record and submitted by the assessee in support of the share capital received by it in the original assessment proceedings on the basis of which assessment order dated 27.12.2007 was passed under section 143(3) of the Act. The AO having got the information from the investigation wing, the least he could do to make inquiry from the shareholders, the details of which were already on the record. Thus we delete the addition in dispute and allow the grounds raised by the assessee.

Summary

Issues:
1. Reopening of assessment under section 147 of the Income Tax Act, 1961.
2. Applicability of the proviso to section 147 of the Act.
3. Alleged lack of tangible material for reopening assessment.
4. Change of opinion in reopening assessment.
5. Discrepancy in assessment of total income.

Analysis:

Issue 1: Reopening of assessment under section 147 of the Income Tax Act, 1961:
The appeal was filed against the order passed by the Ld. CIT(A) relating to the assessment year 2005-06. The original return of income was filed in 2005 and the assessment order under section 143(3) was passed in 2007. Subsequently, the assessment was reopened under section 147 based on a report regarding share capital received from certain companies. The reassessment was completed in 2013, leading to the appeal before the ITAT.

Issue 2: Applicability of the proviso to section 147 of the Act:
The appellant contested that the proviso to section 147 was not applicable as there was no failure on their part to disclose material facts necessary for assessment. The second notice under section 148 was issued after four years from the end of the assessment year without any such failure. The argument was made that the reopening was not justified under the given circumstances.

Issue 3: Alleged lack of tangible material for reopening assessment:
The appellant argued that there was no tangible material to support the reopening of the assessment. It was contended that the information received was not adequately considered, and there was a lack of application of mind in attributing the alleged entries to the appellant. The absence of sufficient grounds for reopening the assessment was highlighted.

Issue 4: Change of opinion in reopening assessment:
The appellant claimed that the reopening of assessment on the second occasion amounted to a change of opinion, which is impermissible under the law. It was contended that the reassessment was merely a reevaluation of the same facts without any new material warranting such action.

Issue 5: Discrepancy in assessment of total income:
The appellant disputed the assessment of total income at ?50,38,750, as opposed to the returned income of ?1250. The denial of liability for such an assessment was a key contention. The appellant sought to challenge the upheld assessment on the grounds of discrepancy and lack of proper justification for the revised total income.

In the detailed analysis, the ITAT considered the submissions of both parties, reviewed relevant documents, and cited legal precedents. Ultimately, the ITAT ruled in favor of the appellant, deleting the addition in dispute and allowing the grounds raised. The decision was based on the lack of adverse observations or comments by the assessing officer on the documents submitted by the appellant, thereby concluding that the addition to the income could not be sustained. The judgment was pronounced on 04.02.2019.