2018 (10) TMI 432 - AT - Income Tax

Reopening of assessment - action u/s. 153A - Held that - In the absence of any incriminating material, returned income was accepted vide assessment order u/s. 153A dtd. 29/12/2010. But because of the search in case of Mr. Modi and Annexure -1 found therein, the addition was made in the present case. The entire basis for making the additions to the assessable income of the Assessee was a single document i.e., Annexure A-1. The attempt at making additions on the basis of Annexure A-1, without any further investigation on the above lines, is bound to be rendered unsustainable in law. In the present case, no reason was assigned by the Assessing Officer or any fresh material was taken into account by the Assessing Officer for reopening the assessment u/s 147. The said action of the Revenue was challenged before the Hon ble High Court and the Hon ble High Court has given a finding of dismissing the appeal of the Revenue therein. The finding of the Hon ble High Court is applicable in the present case and therefore, the action u/s 147 itself is not maintainable and is quashed. Thus, appeal of the Revenue is dismissed and cross objection of the assessee is allowed.

Summary

Issues Involved:
1. Deletion of addition of ?34,06,11,102 by CIT(A).
2. Deletion of addition of ?1,20,00,000 on account of alleged receipt of rent.
3. Justification of reopening of assessment under Section 147 of the Income Tax Act, 1961.
4. Validity of the reasons recorded for reopening the assessment.

Detailed Analysis:

1. Deletion of Addition of ?34,06,11,102 by CIT(A):
The Revenue contended that the CIT(A) erred in deleting the addition of ?34,06,11,102 without properly analyzing the seized documents. The Assessing Officer (AO) had made this addition based on documents seized from the premises of a third party, which allegedly indicated unaccounted investment by the assessee. However, the CIT(A) found that these documents did not belong to the assessee and lacked incriminating material linking the assessee to the alleged undisclosed income. The Tribunal upheld the CIT(A)'s decision, noting that the AO had proceeded on conjectures without concrete evidence, and the High Court had also dismissed the Revenue's appeal on similar grounds.

2. Deletion of Addition of ?1,20,00,000 on Account of Alleged Receipt of Rent:
The AO had added ?1,20,00,000 to the assessee's income, alleging receipt of rent. The assessee contended that no rent was received during the year under consideration and provided evidence to support this claim. The CIT(A) deleted this addition, and the Tribunal found no merit in the Revenue's appeal, as the AO failed to provide substantive evidence to contradict the assessee's submissions.

3. Justification of Reopening of Assessment Under Section 147:
The assessee challenged the reopening of the assessment under Section 147, arguing that it was based on a mere change of opinion and lacked tangible material. The original assessment was completed under Section 153A/143(3) without any incriminating material. The Tribunal observed that the reopening was initiated based on documents found in a search of a third party, which did not directly implicate the assessee. The High Court had also dismissed the Revenue's appeal on this issue, confirming that the reopening was unjustified.

4. Validity of the Reasons Recorded for Reopening the Assessment:
The assessee argued that the reasons recorded for reopening the assessment were mechanical and lacked independent application of mind. The Tribunal noted that the AO had not conducted any further investigation to substantiate the claims made in the seized documents. The High Court's findings supported this view, emphasizing that the AO's actions were based on conjectures without proper verification. Consequently, the Tribunal quashed the reopening of the assessment under Section 147.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection, concluding that the additions made by the AO were unsustainable in law due to lack of incriminating evidence and improper justification for reopening the assessment. The Tribunal's decision was consistent with the High Court's findings, which had previously dismissed the Revenue's appeals on similar grounds. The order was pronounced in the Open Court on 05th October, 2018.