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2018 (6) TMI 1044 - AT - Income TaxValidity of reopening of the assessments u/s 147 for AY 2004-05 - validity of reason to believe - Held that - Validity of the reassessment proceedings shall be determined with reference to reasons recorded. The assessee declared all the particulars and details in the original return of income; the AO was satisfied with the same and accepted u/s 143(1) - AO reached the belief that there was escapement of income on going through the return of income filed by the assessee after he accepted the return u/s 143(1) without scrutiny, and nothing more. Thus, no tangible material was available with the AO, except details already mentioned in the original return of income - this is nothing but a review of earlier proceedings by the AO which is not permissible under law. There is no whisper in the reasons recorded, of any tangible material which came to the possession of the AO subsequent to the issue of intimation. Therefore, the reopening of the assessment is wholly invalid and bad in law - thus relying upon decision of the Delhi High Court in the case of CIT vs. Orient Craft Ltd. 2013 (1) TMI 177 - DELHI HIGH COURT - Decided in favor of assessee. Validity of reopening of the assessments u/s 147 for AY 2005-06 - Held that - The reasons recorded for reopening of the assessment, the AO has not mentioned the necessary ingredients for reopening of the assessment because AO has not mentioned in the reasons that he has reason to believe that income chargeable to tax as escaped assessment - thus the reopening of the assessment is invalid and bad in law - thus following reasons of decision for AY 2004-05, we set aside the order of the authorities below and quash the reopening of the assessment u/s 147/148 - Decided in favor of assessee.
Issues Involved:
1. Reopening of assessments under Section 147 of the Income-tax Act, 1961. 2. Validity of additions on merits. Issue-wise Detailed Analysis: 1. Reopening of Assessments under Section 147: The primary issue in both appeals was the challenge to the reopening of assessments under Section 147 of the Income-tax Act, 1961. The assessee argued that the Assessing Officer (AO) lacked tangible material to form a belief that income had escaped assessment. The AO reopened the assessments based on the same details provided in the original returns, without any new information. The assessee cited the Delhi High Court's decision in CIT vs. Orient Craft Ltd., which held that reopening based on the same return without new tangible material is invalid. The court emphasized that the validity of reassessment must be determined with reference to the reasons recorded, and in this case, no new tangible material was found. The Tribunal noted that the AO's reasons for reopening were based on a review of the original return, which is not permissible under law. The Tribunal cited various judicial precedents, including decisions from the Delhi High Court, Rajasthan High Court, Bombay High Court, and Madras High Court, which consistently held that reopening based on documents already on record without new tangible material is invalid. The Tribunal concluded that the reopening of the assessments was illegal and quashed the proceedings under Section 147/148 of the Act. 2. Validity of Additions on Merits: Since the reopening of the assessments was quashed, the Tribunal did not need to delve into the merits of the additions made by the AO. The quashing of the reassessment proceedings automatically led to the deletion of the entire additions made in the reassessment orders. Assessment Year 2005-06: For the Assessment Year 2005-06, the facts were similar to those of the Assessment Year 2004-05. The AO issued a notice under Section 148 based on the same information provided in the original return. The Tribunal reiterated that the AO did not mention any new tangible material or reasons to believe that income had escaped assessment. Therefore, following the reasoning for the Assessment Year 2004-05, the Tribunal quashed the reopening of the assessment for the Assessment Year 2005-06 as well. Conclusion: In conclusion, the Tribunal allowed both appeals of the assessee, quashing the reopening of assessments for both Assessment Years 2004-05 and 2005-06, and deleted all additions made in the reassessment orders. The order was pronounced in the open court on 19/6/2018.
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