2017 (5) TMI 1801 - HC - Income Tax

Reopening of assessment u/s 147 - Assessment barred by limitation - HELD THAT - Before proceeding with the matter it will not be out of place to mention that the second assessment order for the year 94-95 was over on 29th February, 2000. Taking into consideration that the second reassessment order was between the same parties, the transactions were examined and reopened for the third time after a lapse of almost one year on 28th March, 2001. This is nothing but against the fact that has been observed by Delhi High Court in WEL INTERTRADE PRIVATE LIMITED (FORMERLY WEL INTERTRADE LIMITED) ANOTHER 2008 (8) TMI 18 - HIGH COURT DELHI - It is nothing but harassment and in the year 95-96 which has been considered by the CIT(A) is complete answer to the issue. Decided in favour of the assessee against the department.

Issues Involved:

1. Justification and limitation of notice for reassessment under Section 148.
2. Genuineness of the security/trade credit of Rs. 4,00,000/-.
3. Sustaining the addition for Security/trade deposit with interest amounting to Rs. 2,79,890/- and holding it as bogus.

Detailed Analysis:

1. Justification and Limitation of Notice for Reassessment under Section 148:

The primary issue was whether the notice for reassessment under Section 148 dated 28.3.2001 was justified and not barred by limitation, given that the original assessment was completed after detailed scrutiny under Section 143(3). The court examined the facts, noting that the assessee was assessed for the year 1994-95 on 19th October 1995, and a notice under Section 263 was issued on 31st March 1998, with the order passed on 29th February 2000. The reassessment for the year 1994-95 was done on 28th March 2001. The appellant's counsel argued that the reassessment notice was not justified as the original assessment involved detailed scrutiny and all material facts were disclosed. The court referred to multiple precedents, including the Supreme Court's decision in Ganga Saran & Sons P. Ltd. vs. Income-Tax Officer, which emphasized that both conditions must be satisfied for reassessment: the income must have escaped assessment, and such escapement must be due to the assessee's failure to disclose fully and truly all material facts. The court concluded that the initiation of the third notice was not sustainable, agreeing with the appellant's counsel that the reassessment was barred by limitation and constituted harassment.

2. Genuineness of the Security/Trade Credit of Rs. 4,00,000/-:

The second issue was whether the Income Tax Appellate Tribunal was right in reversing the order of the Commissioner of Income Tax (Appeals) regarding the genuineness of the security/trade credit of Rs. 4,00,000/-. The Tribunal had allowed the department's appeal and reversed the CIT(A)'s order, which had accepted the genuineness of the deposit based on the confirmation from M/s Medicana Medical Agencies. The CIT(A) had observed that the deposit was accepted by the Assessing Officer during the original assessment under Section 143(3). The court noted that the Tribunal did not consider the CIT(A)'s reasoning and relied on precedents indicating that once an assessee discloses all primary facts, the duty ends, and it is for the Assessing Officer to draw the correct inferences. The court found that the Tribunal's reversal of the CIT(A)'s order was unjustified and ruled in favor of the assessee.

3. Sustaining the Addition for Security/Trade Deposit with Interest Amounting to Rs. 2,79,890/- and Holding it as Bogus:

The third issue was whether the Tribunal was right in sustaining the addition for the security/trade deposit with interest amounting to Rs. 2,79,890/- from M/s Magadh Medicos and holding it as bogus. The court examined the facts and the appellant's arguments, noting that the CIT(A) had considered the detailed submissions and precedents, concluding that the deposit was genuine. The court referred to multiple decisions, including those from the Delhi High Court and Gujarat High Court, which emphasized that reassessment based on mere change of opinion or without new material is not justified. The court found that the Tribunal's decision to sustain the addition was incorrect, as it did not properly consider the CIT(A)'s findings and the precedents. Therefore, the court ruled in favor of the assessee, rejecting the Tribunal's decision to hold the deposit as bogus.

Conclusion:

The court concluded that both issues were to be answered in favor of the assessee and against the department. The appeals were allowed, and the reassessment notices and additions were deemed unjustified and not sustainable. The court emphasized the importance of adhering to the principles of full and true disclosure of material facts and the limitations on reassessment beyond the prescribed period.

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