2019 (9) TMI 1715 - AT - Income Tax

Reopening of assessment u/s 147 - case of the assessee as completed us 153A - unexplained cash credit u/s 68 - HELD THAT - We find that that the addition which is in dispute before us has been deleted by the Ld. First Appellate Authority in his order relying on the decision of the Hon ble High Court in the case of Kabul Chawala 2015 (9) TMI 80 - DELHI HIGH COURT and the Revenue challenged that order of the Ld. CIT(A) before the Tribunal. Thus, it is an admitted fact that very sum in respect of which the Assessing Officer reopened the proceeding, were the subject matter of the appeal before the Tribunal. We find that the third proviso mandates that no proceeding can be initiated to tax such income, which is subject matter of the appeal. We are of the considered opinion that AO was not justified in reopening the assessment for assessing the income which was subject matter of the appeal before the Tribunal. Accordingly, we hold the reassessment in the instant case as void-ab-initio thus, the reassessment proceeding are accordingly quashed. Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of reassessment proceedings under Section 147 of the Income Tax Act.
2. Validity of the addition of unexplained credits under Section 68 of the Income Tax Act.
3. Applicability of the third proviso to Section 147, which excludes income that is the subject matter of appeal from reassessment.
4. Procedural aspects regarding the production of evidence and summoning of creditors.

Issue-wise Detailed Analysis:

1. Legality of Reassessment Proceedings:
The appeals questioned the legality of the reassessment proceedings initiated by the Assessing Officer (AO) under Section 147 of the Income Tax Act. The appellant argued that the initiation of reassessment was based on the directions of the Commissioner of Income Tax (Appeals) [CIT(A)], which was beyond the CIT(A)'s jurisdiction. The Tribunal noted that the reassessment proceedings were initiated on the advice of the CIT(A) after the original addition of unexplained credits was deleted by the CIT(A) based on the Delhi High Court's decision in CIT Vs. Kabul Chawala. The Tribunal held that the reassessment was void-ab-initio as the income in question was already the subject matter of an appeal before the Tribunal, making the reassessment proceeding invalid under the third proviso to Section 147.

2. Validity of Addition of Unexplained Credits:
The AO had made additions of Rs. 4,95,00,000 and Rs. 4,62,94,000 for the assessment years 2010-11 and 2011-12, respectively, under Section 68 of the Income Tax Act, citing unexplained credits from Ms. Stanford Hospitality (India) Pvt. Ltd. The CIT(A) initially deleted these additions, relying on the Kabul Chawala case, which required incriminating material found during the search to justify such additions. The Tribunal upheld the CIT(A)'s deletion of the additions, noting that no incriminating material was found during the search, and the reassessment proceedings were invalid.

3. Applicability of the Third Proviso to Section 147:
The Tribunal emphasized the third proviso to Section 147, which states that reassessment proceedings cannot be initiated for income that is already the subject matter of an appeal. Since the additions were already under appeal before the Tribunal, the reassessment proceedings were deemed invalid. The Tribunal highlighted that the third proviso explicitly prevents the AO from reassessing income that is under appellate review, thereby protecting the appellant from double jeopardy.

4. Procedural Aspects Regarding Evidence and Summoning of Creditors:
The AO's efforts to validate the existence of Ms. Stanford Hospitality (India) Pvt. Ltd. included issuing summons under Section 131 and conducting spot inquiries, which revealed that the entity did not exist at the provided address. Despite these findings, the Tribunal focused on the legal framework, ruling that the reassessment was invalid due to procedural improprieties and the third proviso to Section 147. The Tribunal did not delve deeply into the procedural aspects of summoning creditors or verifying evidence, as the reassessment itself was quashed.

Conclusion:
The Tribunal quashed the reassessment proceedings for both assessment years 2010-11 and 2011-12, declaring them void-ab-initio due to the applicability of the third proviso to Section 147. Consequently, the Tribunal did not address other arguments related to the reassessment's legality or the merit of the additions, rendering those issues academic. The appeals were allowed in favor of the assessee, and the reassessment proceedings were invalidated.