2018 (11) TMI 479 - AT - Income Tax

Initiation of re-assessment proceedings u/s. 147 - action after the expiry of 4 years from the end of the relevant assessment year - reason to believe - non independent application of ind by AO - letter has been received from the Ld. CIT-15, Kolkata - Held that - Receipt of information from the Ld. CIT-15, Kolkata, no independent enquiry was also carried out by the AO himself before reaching his independent satisfaction that alleged escapement had actually occurred or that the assessee in fact was beneficiary of any sum received from Shri Chowdhury in the form of sale proceeds of sarees. In such a scenario, when the AO was in receipt of the information from the Ld. CIT-15, Kolkata he ought to have made enquiries to unravel the truth. It has to be remembered that information is not synonymous to truth. Just because a letter has been received from the Ld. CIT-15, Kolkata the AO cannot reopen the completed assessment u/s. 143(3) of the Act. Reason to suspect based on an information can trigger an enquiry to find out whether there is any substance or material to substantiate that there is merit in the information adduced by the Ld. CIT-15, Kolkata and thereafter the AO has to take an independent decision to re-open or not. The reopening of assessment in the present case was done without satisfying the conditions precedent in Section 147 and for that reason the reopening is held to be corum non judice. Therefore, all proceeding subsequently made is null in the eyes of law and so, we quash the notice of reopening u/s. 148 and subsequent orders of the AO and Ld. CIT(A) is also held to be null & void in the eyes of law. Accordingly the assessee succeeds on the legal issue challenged before us. - Decided in favour of assessee

Issues Involved:
1. Legality of the initiation of re-assessment proceedings under Section 147 of the Income Tax Act.
2. Validity of the assumption of jurisdiction by the Assessing Officer (AO) after four years from the end of the relevant assessment year.
3. Adequacy of the reasons recorded by the AO for reopening the assessment.
4. The impact of the reopening on the subsequent penalty imposed under Section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

1. Legality of the initiation of re-assessment proceedings under Section 147 of the Income Tax Act:
The main ground emphasized by the assessee was against the action of the CIT(A) in erroneously deciding the legal issue that the initiation of re-assessment proceedings under Section 147 of the Act was bad in law. The re-assessment was initiated based on information received from the CIT-15, Kolkata, indicating that the assessee received accommodation entries amounting to ?27,50,000 from an entry provider, which led the AO to issue a notice under Section 148. The Tribunal noted that the original assessment was completed under Section 143(3) and the notice for re-assessment was issued after the expiry of four years from the end of the relevant assessment year.

2. Validity of the assumption of jurisdiction by the AO after four years from the end of the relevant assessment year:
The Tribunal emphasized that for reopening an assessment after four years, the AO must demonstrate that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal referred to several judgments, including the Hon’ble Supreme Court in NTPC vs. CIT, which held that the issue of jurisdiction could be raised at any stage. The Tribunal found that the reasons recorded by the AO did not indicate any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Therefore, the assumption of jurisdiction by the AO was invalid.

3. Adequacy of the reasons recorded by the AO for reopening the assessment:
The Tribunal scrutinized the reasons recorded by the AO and found that they did not reveal any specific statement pointing out the failure of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal cited various judgments, including Calcutta Discount Co Ltd and Hindustan Lever Ltd vs. ACIT, to emphasize that the reasons must clearly state the failure of the assessee to disclose material facts. The Tribunal concluded that the AO did not satisfy this jurisdictional fact, making the reopening of the assessment invalid.

4. The impact of the reopening on the subsequent penalty imposed under Section 271(1)(c) of the Income Tax Act:
Since the Tribunal held that the reopening of the assessment was bad in law and quashed the notice under Section 148 and the subsequent orders, the penalty imposed under Section 271(1)(c) for concealing particulars of income was also deemed unsustainable. The Tribunal noted that all consequent actions based on the invalid reopening were non-est in the eyes of law and accordingly cancelled the penalty order.

Conclusion:
The Tribunal allowed the appeals of the assessee, holding that the reopening of the assessment under Section 147 was legally untenable and all subsequent actions, including the penalty imposed under Section 271(1)(c), were null and void. The Tribunal emphasized the importance of adhering to the jurisdictional conditions precedent for reopening an assessment, especially after the expiry of four years from the end of the relevant assessment year.

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