2016 (7) TMI 258 - AT - Income Tax

Validity of reopening of the assessment - Held that - It is an admitted fact, as also evident from the reasons recorded and the assessment order that the initiation of reopening proceedings was made by the Assessing Officer on the basis of information received from the Directorate of Income-tax (Inv.) on the basis of search & seizure operation conducted at the premises of Rock Land Group of Cases and the documents related to the assessee found during the course of search were made available to the Assessing Officer of the present assessee. We thus respectfully following the decision of ACIT vs. Arun Kapur (2012 (6) TMI 403 - ITAT AMRITSAR) hold that provisions of sec. 153C of the Act were applicable in the present case for framing the assessment, if any, which excludes the application of sec. 147 of the Act, hence, notice issued under sec. 148 of the Act and assessment framed in furtherance thereto under sec. 147 read with section 143(3) of the Act are void ab initio. The reassessment in question is accordingly quashed. - Decided in favour of assessee

Summary

Issues involved:
1. Validity of reopening of assessment under sec. 148 of the Income Tax Act, 1961.
2. Addition of ?2,00,000 representing sweat equity shares.
3. Confirmation that shares issued as "sweat equity shares" is income of assessee under section 28(iv).
4. Confirmation of the value of shares issued as "sweat equity shares" at ?200 per share.
5. Confirmation that the conditional issue of shares is a perquisite.

Issue 1: Validity of Reopening of Assessment:
The assessee challenged the reopening of assessment under sec. 148, arguing that the Assessing Officer lacked jurisdiction due to the material being vague and not specific to the belief entertained. The AR contended that the provisions of sec. 153C should have been applied instead of sec. 147, as the material found during the search was the basis for reopening. Citing relevant case laws, the AR argued that the reassessment was void ab initio as the Assessing Officer did not follow the correct procedure. The ITAT agreed, quashing the reassessment as the provisions of sec. 153C were applicable, not sec. 147.

Issue 2-5: Addition of ?2,00,000 for Sweat Equity Shares:
The grounds questioning the addition of ?2,00,000 under section 28(iv) were deemed infructuous due to the finding that the reassessment was void ab initio. As a result, these issues did not require further adjudication and were disposed of accordingly.

In conclusion, the ITAT Delhi ruled in favor of the assessee, allowing the appeal based on the quashing of the reassessment due to the incorrect application of the provisions under sec. 147 instead of sec. 153C. The addition of ?2,00,000 for sweat equity shares was not upheld, as the reassessment was deemed void ab initio.