2019 (8) TMI 98 - AT - Income Tax

Reassessment proceedings u/s.147 - undisclosed sales - AO on information from the Joint Commissioner of Sales-tax, Economic Intelligence, Mumbai, alleged that assessee had collected sales tax @16% and showed only 4% to the Income-tax authorities, which lead to escapement of income - as per assessee no sales tax was collected - HELD THAT - Here, we are confronted with a situation in which the assessee did not collect any Sales-tax at all and the entire exercise of showing inter-State sales instead of within State sales was aimed at increasing the balance of eligibility as per certificate which simply entitled it to make sales without charging any Sales-tax. Thus, it is established that the action of the assessee in resorting to such dubious means simply affected his liability under the Sales-tax Act without increasing the income chargeable to income-tax. Since no income escaped assessment by reason of the assessee showing sales made in Maharashtra as inter-State sales, we are satisfied that the ld. CIT(A) was justified in quashing initiation of reassessment proceedings. As the initiation of reassessment proceedings is held to be invalid, the sequitur is that the proceedings flowing there from should automatically stand cancelled including the additions so made by the AO. - Decided in favour of assessee.

Summary

Issues:
1. Quashing of initiation of reassessment proceedings u/s.147 of the Income-tax Act, 1961 for A.Y. 2003-04.
2. Similarity of facts and quashing of reassessment proceedings for A.Y. 2004-05.

Analysis - A.Y. 2003-04:
The Revenue appealed against the quashing of reassessment proceedings by the ld. CIT(A) for A.Y. 2003-04. The AO initiated reassessment based on information from the Sales-tax Department, alleging that the assessee misrepresented sales as inter-State instead of within Maharashtra, leading to evasion of sales-tax. The AO believed that this constituted undisclosed income of ?79,58,760. However, the Tribunal found that the assessee, under a special incentive scheme, was authorized to sell goods without charging sales-tax, and there was no evidence of actual tax evasion. The Tribunal concluded that the actions did not result in income chargeable to tax escaping assessment, thus upholding the CIT(A)'s decision to quash the reassessment. Consequently, all proceedings and additions made by the AO were canceled.

Analysis - A.Y. 2004-05:
The facts for A.Y. 2004-05 mirrored those of the preceding year. The AO initiated reassessment proceedings based on similar grounds as in A.Y. 2003-04, alleging undisclosed income of ?88,12,486 due to misrepresentation of sales. Following the decision for A.Y. 2003-04, the Tribunal quashed the reassessment proceedings for this year as well. Since there was no disparity in facts between the two assessment years, the Tribunal dismissed both appeals, affirming the quashing of reassessment proceedings for A.Y. 2004-05.

In conclusion, the Tribunal upheld the quashing of reassessment proceedings for both A.Y. 2003-04 and A.Y. 2004-05, emphasizing that the actions of the assessee did not result in any income chargeable to tax escaping assessment. The Tribunal's detailed analysis of the facts and legal provisions led to the cancellation of all proceedings and additions made by the AO in both assessment years.