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2019 (11) TMI 211 - AT - Income TaxReopening of assessment u/s 147/148 - HELD THAT - Assessee in the present ground is challenging the validity of the reassessment proceedings u/s 147/148. The law on re-opening of an assessment under the Act, is fairly settled. AO can re-open an assessment only in accordance with the express provisions provided in Section 147/148 of the Act. It is only on the AO strictly satisfying the provisions of Section 147 of the Act that he acquires jurisdiction to re-open an assessment. Section 147 of the Act, clothes the Assessing Officer with jurisdiction to reopen an assessment on satisfaction of the following (a) The Assessing Officer must have reason to believe that (b) Income chargeable to tax has escaped the assessment and (c) In cases where the assessment sought to be reopened is beyond the period of four years from the end of the relevant assessment year, then an additional condition is to be satisfied viz there must be failure on the part of the Assessee to fully and truly disclose all material facts necessary for assessment. The requirement in the first proviso to Section 147 of there having to be a failure on the part of the Assessee to disclose fully and truly all material facts does not at all apply where the initial return has been processed under Section 143(1) The reasons recorded by the AO is on the basis of verification of the return of income filed by the Assessee alongwith with the enclosures. According to the AO it shows that assessee has given loan to Shri Gajanan Koli for investment in Adasrsh CHS, the genuineness of the source of investments is not proved and thus he has reason to believe that income chargeable to the extent of loan given has escaped assessment. AO was not justified in taking recourse to the provisions of Sec. 147 of the Act and it stuck down the initiation of assessment proceedings and the consequential assessment order passed u/s 147 AO in the present case was not justified in taking recourse to the provisions of s. 147 of the Act and therefore the initiation of reassessment proceedings are not in accordance with law. Therefore set aside the initiation of reassessment proceedings and the consequential assessment order.
Issues Involved:
1. Validity of the reopening of assessment under Section 147/148 of the Income Tax Act. 2. Addition under Section 68 concerning a loan given by the assessee. 3. Treatment of business income as income from other sources. Issue-wise Detailed Analysis: 1. Validity of the Reopening of Assessment: The primary issue is the validity of the reassessment proceedings initiated under Section 147/148 of the Income Tax Act. The assessee challenged the reopening, arguing that the reasons recorded for reopening were arbitrary and lacked valid satisfaction or approval. The original return for AY 2005-06 was filed on 27.10.2005 and processed under Section 143(1). The notice for reopening was issued on 19.03.2012, beyond the four-year period from the end of the relevant assessment year. The reasons for reopening included the advancing of interest-free loans to Mr. Gajanan Koli without security, which the AO suspected as unverified sources of investment. The Tribunal noted that the reopening was based on the verification of the return and enclosures, without any tangible material suggesting income escapement. The Tribunal referenced various High Court rulings, including the Delhi High Court in CIT Vs. Orient Craft Ltd and the Gujarat High Court in Inductotherm (India) P Ltd Vs. M Gopalan, emphasizing that reopening for mere verification or fishing inquiries is impermissible. The Tribunal also noted that similar reasons for reopening were struck down in the cases of the assessee's family members by the Co-ordinate Bench on 11.09.2019. 2. Addition under Section 68: The second issue involved the addition of ?3,50,000 under Section 68, related to a loan given by the assessee to Mr. Gajanan Koli. The assessee argued that the loan was given out of tax-paid and disclosed income, and thus, the addition amounted to double taxation. However, since the Tribunal held the reassessment proceedings invalid, this ground became academic and did not require further adjudication. 3. Treatment of Business Income as Income from Other Sources: The third issue was the treatment of ?6,99,960 as income from other sources instead of genuine business income. The assessee contended that the AO's treatment lacked contrary evidence. Similar to the second issue, this ground also became academic due to the invalidation of the reassessment proceedings. Conclusion: The Tribunal concluded that the AO was not justified in reopening the assessment under Section 147/148 as it was based on mere suspicion and verification without tangible material. Consequently, the reassessment proceedings and the consequential orders for AY 2005-06, 2006-07, and 2007-08 were set aside. All grounds raised by the assessee were allowed, rendering the merits of the additions and income treatment as academic. Order Pronouncement: The appeals of the assessee were allowed, and the order was pronounced on 1st November 2019.
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