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2019 (7) TMI 288 - AT - Income TaxReopening of assessment u/s 147 - proceedings u/s 147 after expiry of 6 years - direction by court or mere observation - HELD THAT - AO has initiated proceedings u/s 147 after expiry of 6 years and had not brought on record any failure on the part of the assessee. AO applied the provisions of section 150, when the findings of the coordinate bench are not direction but observation. Therefore, in our considered opinion, the proceedings initiated u/s 147 beyond 6 years are void ab-initio as the notice u/s 148 cannot be issued after the expiry of 6 years as per the time limit prescribed u/s 149 of the Act. In this case, AO issued the notice after expiry of 6 years and initiated the proceedings only after the observations made by the ITAT in its order. As stated earlier, the section 150 is also not attracted in this case. Therefore, the proceedings were initiated for reopening after period of limitation u/s 149 is void. - Appeal of the assessee is allowed.
Issues Involved:
1. Validity of proceedings initiated under Section 147 after the expiry of the six-year limitation period. 2. Applicability of Section 150 and whether the ITAT's observations constituted a "direction" for reopening the assessment. 3. The genuineness of the transaction and the unexplained credit of ?3,00,50,000 under Section 68 of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Validity of Proceedings under Section 147: The assessee filed its return for AY 2007-08 on 02/12/2009. The reopening of the assessment was based on the observations made by the ITAT in the case of a partner in the firm M/s SVK Projects. Notice u/s 148 was issued on 10/11/2014, beyond the six-year limitation period prescribed under Section 149. The assessee contended that the notice was issued beyond the permissible time limit and thus was invalid. The ITAT agreed, stating that the reopening of the assessment after the expiry of six years was void ab initio. 2. Applicability of Section 150: The AO justified the reopening of the assessment under Section 150, citing the ITAT's observations in the case of Mr. D.V. Krishna Reddy. However, the ITAT clarified that its statements were mere observations and not directions. The ITAT emphasized that Section 150 was not applicable as there was no explicit direction to reopen the assessment. The proceedings initiated under Section 147 based on these observations were deemed invalid. 3. Genuineness of the Transaction and Unexplained Credit: The AO made an addition of ?3,00,50,000 as unexplained credit under Section 68, arguing that the assessee failed to provide evidence regarding the identity, address, PAN, and creditworthiness of the investors. The CIT(A) upheld this addition, stating that the assessee did not satisfactorily explain the genuineness of the transactions. However, the ITAT noted that the source of the funds was from advances collected by M/s SVK Projects and invested in another firm. The ITAT had previously deleted a similar addition in the hands of Mr. D.V. Krishna Reddy and observed that any inquiry should be directed at M/s SVK Projects, not the individual partner. The ITAT concluded that the addition in the hands of the assessee was unwarranted. Conclusion: The ITAT quashed the assessment order, ruling that the proceedings initiated under Section 147 were void due to the expiry of the six-year limitation period. The application of Section 150 was invalid as the ITAT's observations did not constitute a direction. The addition of ?3,00,50,000 as unexplained credit was also deleted, as the source of funds was satisfactorily explained. The appeal of the assessee was allowed.
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