2018 (7) TMI 2202 - AT - Income Tax

Reopening of assessment u/s 147 - sufficiency of reasons - AO jurisdiction to proceed with the reassessment proceeding - HELD THAT - The specific observations of the Jurisdictional High Court in case of CIT vs. Shri Ram Singh 2008 (5) TMI 200 - RAJASTHAN HIGH COURT are that in case during the proceedings U/s 147 of the Act, the AO came to conclusion that any income chargeable to tax which according to the reasons to believe has escaped assessment for any assessment year, did not escape assessment, then, the mere fact, that the AO entertained a reason to believe though a genuine reasons to believe would not continue to vest him with the jurisdiction to tax any other income. In the case once the income which was proposed to assess as per reasons recorded by the AO found declared in the return of income then, the AO ceased to have jurisdiction to proceed with the reassessment proceeding to assess any other income to tax. In view of the above facts and circumstances of the case and by following in case of the CIT vs. Shri Ram Singh we hold that the reassessment is in valid and not sustainable in law. Accordingly, we quash the reopening of the assessment and consequential reassessment - Appeal filed by the assessee is allowed

Summary

Issues:
Validity of reopening of assessment based on undisclosed income.

Analysis:
The appeal was directed against the order of CIT (A) for the assessment year 2003-04. The AO reopened the assessment based on transactions with MKM finsec, alleging an income of ?5,60,845 had escaped assessment. The assessee contended that the amount was disclosed as part of long term capital gain from the sale of shares. The Tribunal initially rejected the contention but later recalled the order for fresh hearing. The issues raised included the validity of proceedings under sections 147 and 148 of the IT Act, and the sufficiency of reasons for reopening the assessment.

The assessee filed the return of income declaring total income of ?1,19,1220/-. The AO reopened the assessment to assess the income related to two DDs totaling ?5,60,845 received from MKM Finsec. The assessee had disclosed these amounts as part of long term capital gain and claimed deductions. The AO, however, treated the entire sale consideration as bogus transactions. The Tribunal confirmed the addition but failed to consider that the disclosed amount was part of the declared income. The High Court's decision in CIT vs. Shri Ram Singh emphasized that if the income proposed for assessment is found declared in the return, the AO lacks jurisdiction to proceed with reassessment. Thus, the reassessment was deemed invalid and unsustainable in law, leading to the quashing of the reopening and consequential reassessment.

In conclusion, the Tribunal found the reassessment invalid and allowed the appeal filed by the assessee. The judgment emphasized the importance of disclosed income in the return and the jurisdictional limitations on reassessment proceedings.