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2018 (4) TMI 606 - AT - Income TaxReopening of assessment - No fresh information and reassessment is based on change of opinion - no approval U/s 151 - Held that - The revenue could not controvert the fact that the reopening has been made to meet the objections raised by the audit party. It is also not disputed that the assessment was reopened after four years from the end of the relevant assessment year and no approval U/s 151 of the Act is placed on record. Moreover, the assessee has placed before the Assessing Officer all relevant material during the original assessment proceedings. Under these undisputed facts, we are of the view that the action of the Assessing Officer is contrary to the settled law, which demonstrates that the Assessing Officer has not applied his mind independently. Hence, we find force into the submission made by the assessee. The impugned assessment order is hereby quashed being contrary to the law. - Decided in favour of assessee
Issues:
1. Legality of reopening of assessment under Section 147 of the Income Tax Act, 1961. 2. Requirement of fresh information for initiating reassessment proceedings. 3. Approval under Section 151 of the Income Tax Act, 1961 for reopening assessment. 4. Independent application of mind by the Assessing Officer. 5. Applicability of Section 50C of the Act in the assessment. 6. Quashing of the assessment order due to lack of independent application of mind. Issue 1: Legality of Reopening of Assessment: The appeal challenged the reopening of the assessment under Section 147 of the Income Tax Act, 1961. The Assessing Officer initiated reassessment proceedings based on an audit report, without any fresh information or material. The appellant argued that this amounted to a change of opinion and was unlawful. Citing legal precedents, the appellant contended that the reassessment was not valid as it lacked tangible material to demonstrate income escapement. The Tribunal found merit in the appellant's argument and quashed the assessment order, ruling that the Assessing Officer did not apply his mind independently. Issue 2: Requirement of Fresh Information: The appellant contended that the reassessment was initiated without any new material, solely based on the internal audit report which was already part of the original assessment. The Tribunal agreed with the appellant's stance, emphasizing that the reassessment should be backed by tangible material indicating income escapement. The absence of fresh information rendered the initiation of reassessment proceedings unlawful. Issue 3: Approval under Section 151 of the Income Tax Act: It was argued that the reassessment notice lacked the necessary approval under Section 151 of the Income Tax Act, 1961. The Tribunal noted that no sanction was obtained from the Joint Commissioner of Income Tax, rendering the proceedings void ab initio. The absence of proper authorization for issuing the notice raised a significant procedural flaw in the reassessment process. Issue 4: Independent Application of Mind: The Assessing Officer's failure to independently apply his mind and reliance solely on the audit report was highlighted as a violation of Section 147 requirements. The Tribunal concurred with the appellant's contention that the Assessing Officer did not demonstrate an independent thought process in initiating the reassessment. This lack of independent assessment further invalidated the reassessment proceedings. Issue 5: Applicability of Section 50C of the Act: The appellant argued against the addition made under Long Term Capital Gains invoking Section 50C of the Act. The Tribunal observed that Section 50C was erroneously applied as it came into effect after the relevant assessment year. This misapplication of the provision contributed to the flawed assessment process, further supporting the decision to quash the assessment order. Issue 6: Quashing of the Assessment Order: Considering the flaws in the reassessment process, including the lack of fresh material, absence of required approval, and failure to independently apply mind, the Tribunal quashed the assessment order. As a result, the other grounds of appeal were deemed academic, and the appeal of the assessee was allowed. This detailed analysis of the judgment highlights the key issues raised by the parties, the legal arguments presented, and the Tribunal's findings on each aspect, ultimately leading to the decision to quash the assessment order.
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