2016 (6) TMI 1459 - AT - Income Tax

Validity of reopening of assessment u/s 147 - Reasons to believe or purposes of verification - As in Original return of income the assessee has shown income of Rs. Nil after claiming deduction under chapter VI-A of business income and in revised return loss without claiming any deduction under chapter VI-A claimed - HELD THAT - AO failed to make out any case for escapement of income. He sought to reopen the assessment merely for re-verification of certain documents which is not contemplated in the Act. No merit in the present appeal because the ld.CIT(A) has placed reliance upon the decision of tINDUCTOTHERM (INDIA) PVT. LTD. 2012 (9) TMI 16 - GUJARAT HIGH COURT holding that notice under section 148 was not issued by the AO after lying his hand on any information which enable him to form a belief that the income has escaped assessment. The ld.AO merely sought to reopen the assessment for verification of the details which is not contemplated under section 147 of the Act - Appeal of the Revenue is dismissed.

Summary

Issues involved:
1. Validity of reassessment order under section 147 of the Income Tax Act.
2. Justification for reopening the assessment based on the difference in income shown in original and revised returns.
3. Compliance with legal requirements for reopening assessments.

Issue 1: Validity of reassessment order under section 147 of the Income Tax Act:
The Appellate Tribunal ITAT Ahmedabad considered the appeal by the Revenue against the order of the Ld.CIT(A)-III, Baroda, challenging the quashing of the reassessment order. The Tribunal noted that the Revenue's grievance was that the ld.CIT(A) erred in quashing the reassessment order on the grounds of it not being in accordance with the law. The Tribunal observed that the AO had issued a notice under section 147 of the Income Tax Act, 1961, for reopening the assessment based on certain reasons related to the difference in income declared in the original and revised returns. However, the First Appellate Authority found that the AO failed to establish any case for income escapement and reopened the assessment solely for verification purposes, which is not permissible under the Act. The Tribunal upheld the First Appellate Authority's decision, citing a judgment by the Hon'ble Gujarat High Court in a similar matter, emphasizing that reopening an assessment for mere verification without tangible material indicating income escapement is not valid.

Issue 2: Justification for reopening the assessment based on the difference in income shown in original and revised returns:
The Tribunal analyzed the reasons recorded by the AO for reopening the assessment, which primarily focused on the substantial difference in income between the original and revised returns. The AO sought to verify the claim of refund granted in both returns and the disparity in income declarations. However, the First Appellate Authority determined that the AO lacked sufficient grounds to believe that income had escaped assessment and had reopened the assessment solely for verification purposes, which is impermissible under the law. The Tribunal concurred with the First Appellate Authority's findings and emphasized the necessity for tangible material indicating income escapement to justify reopening assessments under section 147 of the Act.

Issue 3: Compliance with legal requirements for reopening assessments:
The Tribunal highlighted the importance of adhering to legal requirements when reopening assessments under section 147 of the Income Tax Act. It referenced a judgment by the Hon'ble Gujarat High Court, which emphasized that the Assessing Officer must have tangible material to form a belief that income chargeable to tax has escaped assessment, even in cases previously accepted without scrutiny. The Tribunal reiterated that the AO cannot reopen assessments for mere verification purposes without concrete evidence of income escapement. Consequently, the Tribunal dismissed the Revenue's appeal, as the reassessment was deemed invalid due to the lack of substantive grounds for income escapement, as required by law.

---