2014 (8) TMI 1233 - AT - Income Tax

Reopening of assessment u/s 147 - Reason to believe - HELD THAT - As decided in 2014 (1) TMI 1928 - ITAT HYDERABAD it is the duty of the assessing officer to record valid reasons for reopening of the assessments as otherwise re-opening becomes bad in law since there is no live link/nexus between the reasons recorded and the formation of a belief in order to invoke the provisions concerning escapement of income - facts and circumstances in the group of cases posted now are mutatis mutandis identical since the statement of Shri Raju does not indicate anything about the present companies and no further investigation was made by the assessing officer before issuance of notice u/s 148 of the Act and thus the re-opening of assessments is bad in law. Decided in favour of assessee.

Summary

Issues:
Validity of reopening of assessment for the assessment year 2002-03.

Analysis:
The appeals before the Appellate Tribunal ITAT Hyderabad pertained to separate but identical orders passed by the CIT(A)-VII, Hyderabad, regarding the assessment year 2002-03. The main contention raised was the validity of the reopening of assessments without proper reasons to believe that income had escaped assessment. The assessing officer sought to reopen the assessments based on a letter from the ex-Chairman of a company indicating falsification of accounts. However, the Tribunal emphasized that the recording of reasons before issuing a notice under section 148 should have a nexus with the assessment made. It was noted that the assessments could not be reopened beyond four years without the failure of the assessee to disclose all material facts. The Tribunal found that there was no tangible material to establish income escapement, and the reopening was based on a wrong foundation. It was concluded that there was no live link between the reasons recorded and the formation of belief for income escapement, leading to the reopening being deemed bad in law.

The Tribunal referred to a previous order where it was held that the duty of the assessing officer is to record valid reasons for reopening assessments; otherwise, the reopening would be considered bad in law. The Tribunal highlighted that the statement provided by the ex-Chairman did not implicate the present companies, and no further investigation was conducted before issuing notices under section 148 of the Act. The Departmental Representative conceded that the issue was covered by previous decisions but argued that the similar modus operandi suggested by the ex-Chairman justified the reopening. However, the Tribunal reiterated that the reopening of assessments was bad in law, following the precedent set in previous cases.

After considering the rival submissions, the Tribunal found that the facts and circumstances in the present appeals mirrored those of previous cases where reopening of assessments was deemed bad in law. Therefore, the Tribunal set aside the assessments and orders passed by the CIT(A), allowing the appeals filed by the assessees. The Tribunal concluded that the reopening of assessments was bad in law and deemed the issues concerning merits as purely academic, hence not necessary to consider further. Ultimately, the appeals of the assessees were allowed, and the order was pronounced in open court on 11.08.2014.