2018 (6) TMI 1767 - AT - Income Tax

Reopening of assessment u/s 147 - assessment beyond the period of 4 years from the end of the relevant assessment year - HELD THAT - When the AO has not found any infirmity in the claim of the assessee of receiving share application money against allotment of shares to M/s. Lexus Infotech Ltd. and M/s. Vanguard Jewels Ltd. while completing the assessment under section 143(3) on 7th December, 2009 then the reopening after 4 years in the absence of failure on the part of the assessee to disclose fully and truly all material necessary for assessment is not valid. As mandatory condition as per the proviso to section 147 that when the assessment is completed under section 143(3) then no action shall be taken under this section after expiry of 4 years from the end of the relevant assessment year until and unless income chargeable to tax has escaped assessment by the reason of failure on the part of the assessee to disclose all the material facts necessary for assessment. When the AO himself has not made any allegation against the assessee to disclose fully and truly all material facts necessary for the assessment then the reopening after 4 years is without jurisdiction of the AO as the existence of the jurisdictional condition precedent to exercise of power to reopen the assessment beyond the period of 4 years from the end of the relevant assessment year has not been established. We hold that the reopening in the case in hand is not valid and the same is quashed. Thus the consequential reassessment order passed by the AO is set aside. - Decided in favour of assessee.

Summary

Issues:
1. Validity of reassessment under section 147 of the IT Act.
2. Addition of ?30 lakhs under section 68 as unexplained share capital money.
3. Addition of ?15,000 under section 69C for alleged commission payment.
4. Request for amendment of grounds of appeal.
5. Claim for appropriate costs.

Issue 1: Validity of reassessment under section 147 of the IT Act:
The assessee challenged the validity of reassessment under section 147 of the IT Act, arguing that the AO reopened the assessment after four years from the end of the assessment year without establishing any failure on the part of the assessee to disclose all material facts necessary for assessment. The AO's reasons for reopening the assessment were based on information received from the Investigation Wing, Mumbai, alleging that the assessee had taken accommodation entries in the form of loan/advance. However, the AO did not make any specific allegation that the assessee failed to disclose all relevant facts during the original assessment under section 143(3). The Tribunal held that since the AO did not establish any failure on the part of the assessee to disclose material facts, the reopening of the assessment after four years was not valid and quashed the reassessment order.

Issue 2: Addition of ?30 lakhs under section 68 as unexplained share capital money:
The AO had made an addition of ?30 lakhs under section 68 as unexplained share capital money received from M/s. Lexus Infotech Ltd. and M/s. Vanguard Jewels Ltd. The assessee contended that these amounts were received against allotment of shares and were duly recorded in the books of accounts and disclosed during the original assessment proceedings. Since the reassessment itself was held invalid, the Tribunal did not delve into the merits of this addition.

Issue 3: Addition of ?15,000 under section 69C for alleged commission payment:
The AO had also made an addition of ?15,000 under section 69C on account of alleged commission payment related to the share capital money. However, as the reassessment was quashed, the Tribunal did not address this issue separately.

Other Matters:
The Tribunal allowed the assessee's appeal since the reopening and consequential reassessment were deemed invalid. Consequently, the Tribunal did not address the other grounds raised on the merits of the additions made by the AO. The Tribunal set aside the reassessment order and pronounced the decision in favor of the assessee on 11/06/2018.