2023 (8) TMI 1467 - AT - Income Tax

Validity of reassessment proceedings - notice issued beyond four years - pre-requisite under the First Proviso to section 147 - reason to believe or suspect - AO received certain information from Investigation Wing regarding acceptance of alleged bogus unsecured loans by the assessee - failure on the part of the assessee to disclose the material facts fully and truly or not? - HELD THAT - AO on the basis of examination of Balance Sheet of M/s. Mangal Murti Impex Pvt Ltd has come to the conclusion that the income in the hands of the assessee has escaped assessment. However the reasons which have been recorded by the AO for reopening of the assessment do not disclose that the assessee had failed to disclose fully and truly all material facts necessary for the purpose of assessment. In fact we notice that during the first round reassessment the assessing officer has called for the details pertaining to the loan transactions and that the assessee has submitted the loan details including the loan confirmation Bank statement and the return of income of M/s. Mangal Murti Impex Pvt Ltd. There is merit in the argument that there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment. We in this regard notice that the reasons recorded do not allege any failure on part of the assessee to disclose material facts which is the basis on which the reopening is done. In the reasons recorded AO has elaborated only about the survey proceedings of JPV Group and the enquiry done with regard to the loan transactions of JPV group with certain non-genuine parties including M/s. Mangal Murti Impex Pvt Ltd. The Assessing Officer has not mentioned about any new material that has been brought on record with regard to the loan transaction basis which assessee s case is reopened. A mere recording that I have reason to believe that the income chargeable to tax above Rs 1 Lakh has escaped assessment for the A.Y. 2011-12 in the case of the said assessee within the meaning of section 147 of the Income Tax Act 1961 does not mean that the restriction imposed by the proviso to Section 147 of the Act is fulfilled by the Assessing Officer. Thus in the absence of any allegation of any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment in the notice for reassessment issued after the expiry of four years from the end of the relevant assessment year under section 148 of the Act is barred by limitation prescribed in proviso to section 147 of the Act without jurisdiction - Decide in favour of assessee.

Summary

Issues Involved:
1. Reopening of assessment beyond 4 years without satisfying the prerequisites u/s 147.
2. Additions made u/s 68 with respect to loan transactions.
3. Addition with respect to interest paid on loan.
4. Addition made towards commission expenses with respect to the aforesaid loan.

Summary:

Issue 1: Reopening of Assessment Beyond 4 Years
The Tribunal examined whether the reopening of assessments for AY 2011-12, 2012-13, and 2013-14 was valid under the First Proviso to section 147 of the Income-tax Act, 1961. The assessee argued that the reopening was invalid as there was no failure on their part to disclose fully and truly all material facts necessary for assessment. The Tribunal noted that the reasons recorded by the Assessing Officer (AO) did not mention any failure by the assessee to disclose material facts. The AO's reasons were based on information from the Investigation Wing and analysis of the balance sheet of M/s Mangalmurti Impex Pvt Ltd. The Tribunal concluded that the reopening was merely a change of opinion and barred by limitation, thus quashing the reassessment orders and the additions made therein.

Issue 2: Additions Made u/s 68
The AO made additions u/s 68 treating the loans from M/s Mangalmurti Impex Pvt Ltd as unexplained cash credits. The Tribunal found that during the first round of reassessment, the AO had already examined the loan transactions and accepted the returned income. Since there was no new material or information, the Tribunal held that the reassessment was invalid and the additions u/s 68 were deleted.

Issue 3: Addition with Respect to Interest Paid on Loan
The AO disallowed the interest paid on the loan from M/s Mangalmurti Impex Pvt Ltd, treating it as unexplained expenses u/s 69C. The Tribunal, having quashed the reassessment, also deleted the disallowance of interest.

Issue 4: Addition Made Towards Commission Expenses
The AO made additions towards commission expenses related to the loan transactions. The Tribunal, having found the reassessment invalid, deleted the additions towards commission expenses as well.

Conclusion:
The Tribunal allowed the appeals for AY 2011-12 to 2013-14, quashing the reassessment orders and deleting all related additions. The Tribunal emphasized that the reopening of assessments beyond 4 years without satisfying the prerequisites u/s 147 was invalid.