2020 (2) TMI 559 - AT - Income Tax

Reopening of assessment u/s 147 - addition made in respect of section 2(22)(e) - HELD THAT - The basis of re-assessment proceedings is that the Assessing Officer should have the reason to believe that some income has escaped assessment, that belief should lead him to reach a logical conclusion i.e. in the final assessment he should bring those incomes which had earlier escaped from tax, now they should be taxed. In this case, the Assessing Officer fails to do so. None of the issues for which reopening was initiated, no additions are made in respect of them. Taking guidance from the decisions of jurisdictional High Court in CIT Vs. Smt. Maniben Valji Shah 2005 (2) TMI 35 - BOMBAY HIGH COURT and CIT Vs. Jet Airways (I) Ltd. 2010 (4) TMI 431 - HIGH COURT OF BOMBAY firstly the basic criteria of section 147/148 of the Act is not fulfilled as evident from the action of the Assessing Officer; secondly, there is no rational and intelligible nexus between the reasons and the belief. In such circumstances, we are of the considered view that the action of Assessing Officer in resorting to reopening of assessment and framing the assessment u/s 143(3) r.w.s. 147 of the Act is not valid in law and we accordingly, quash the re-assessment order. Appeals of assessee are allowed.

Summary

Issues:
Validity of re-assessment proceedings u/s 147 / 148 of the Income-tax Act, 1961.

Analysis:
The appeals before the Appellate Tribunal ITAT Pune involved related assessees challenging separate orders of the Ld. CIT(A)-1, Kolhapur for the assessment years 2009-10 and 2008-09 under section 143(3) r.w.s. 147 of the Income-tax Act, 1961. The legal grounds raised pertained to the validity of re-assessment proceedings u/s 147 / 148 of the Act. The Assessee argued that the additions made by the Assessing Officer were on issues different from those for which the re-assessment was initiated. The Assessing Officer had reasons to believe that income had escaped assessment, but no additions were made on those specific issues. The Appellate Tribunal consolidated the cases for convenience and analyzed the facts and legal arguments presented.

The Departmental Representative (DR) acknowledged that the addition made by the Assessing Officer was not in line with the reasons for reopening the assessment. The Assessee's representative referred to a previous Pune Tribunal order in a similar case, emphasizing the importance of valid reasons for escapement of income before initiating re-assessment proceedings. The Assessee also cited a Bombay High Court decision outlining the criteria for re-assessment under section 147 / 148 of the Act, emphasizing the need for a rational and intelligible nexus between reasons and belief for income escapement.

After considering the arguments and case records, the Tribunal found that no additions were made on the issues for which the re-assessment was initiated. The Tribunal observed that the Assessing Officer failed to establish a logical connection between the reasons recorded and the final assessment. Citing precedents and legal principles, the Tribunal concluded that the re-assessment proceedings and resulting assessment were not valid in law. Consequently, the Tribunal quashed the re-assessment orders for both appeals, as the facts and circumstances were identical in both cases.

In the final verdict pronounced on January 8, 2020, the Appellate Tribunal allowed both appeals of the assessee, emphasizing the lack of a valid basis for the re-assessment proceedings and subsequent assessment under section 147 / 148 of the Income-tax Act, 1961.