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2020 (9) TMI 1090 - AT - Income TaxReopening of assessment u/s 147 - Validity of reason to believe - overstatement of capital fund of assessee trust - HELD THAT - As noticed from the documents submitted by the assessee that this issue was already been questioned by the AO at the time of making original assessment u/s.143(3). In response to this, the assessee submitted his reply and financial statement before the AO and the notes of account were also appended with the financial statements. Documents available before us that this case has been reopened by the AO on the basis of audit objection in regard to capital funds. The assessee had also duly replied of the audit objections as per his letter which is placed on record. Details of capital funds were also submitted before the AO, which means this issue was already been examined by the AO at the time of framing original assessment. In absence of any new material pointed out by the assessee in the reasons recorded, the reassessment u/s.147 of the Act is null and void and we quash the reassessment order passed by the AO on legal ground. Since we have already quashed the reassessment order passed by the AO on legal ground, other grounds on merits need no adjudication. Thus, the appeal of the assessee is allowed on legal ground.
Issues Involved:
1. Legality of the CIT(A) order. 2. Validity of notice issuance under sections 147/148. 3. Justification of the addition made by the AO and partially confirmed by CIT(A). 4. Procedural adherence in the pronouncement of the order. Issue-wise Detailed Analysis: 1. Legality of the CIT(A) Order: The assessee contended that the CIT(A)'s order was illegal, erroneous, and perverse and thus needed to be quashed. The Tribunal examined the procedural and substantive aspects of the CIT(A)'s decision, focusing on whether the CIT(A) correctly upheld the reassessment initiated by the AO under sections 147/148 of the Income Tax Act, 1961. 2. Validity of Notice Issuance under Sections 147/148: The primary contention was that the notice issued under sections 147/148 was bad in law as no new material was available to the AO to initiate action under section 147. The Tribunal scrutinized the reasons recorded by the AO for reopening the case, which included discrepancies in the capital fund balances and uncredited receipts under the shopping complex/library head. The Tribunal found that the AO had reopened the case based on an audit objection regarding the capital funds, which had already been addressed during the original assessment. Citing the Supreme Court's decision in CIT Vs. M/s Kelvinator of India Limited and the Punjab and Haryana High Court's decision in Pr. CIT Vs. Baldev Singh, the Tribunal emphasized that the reassessment based on a "mere change of opinion" without "tangible material" is not permissible. Consequently, the Tribunal quashed the reassessment order on legal grounds, declaring it null and void. 3. Justification of the Addition Made by the AO and Partially Confirmed by CIT(A): The assessee argued that the addition made by the AO and partially confirmed by the CIT(A) lacked proper appreciation of facts and was against the express provisions of law. The Tribunal noted that the AO had added ?98,50,000 due to an unexplained increase in the capital fund and ?2,07,46,843 for receipts under the shopping complex/library head, totaling ?3,05,51,843 as escaped assessment. The Tribunal observed that these issues were already examined during the original assessment, and the AO had accepted the nil return after giving effect to Section 12AA r.w.s. 11 of the Act. Since the reassessment was quashed on legal grounds, the Tribunal did not adjudicate further on the merits of these additions. 4. Procedural Adherence in the Pronouncement of the Order: The Tribunal addressed the procedural issue of the delayed pronouncement of the order beyond the 90-day period stipulated in Rule 34(5) of the Income Tax Appellate Tribunal Rules, 1962. The Tribunal explained that the delay was due to the unprecedented COVID-19 pandemic and the resulting nationwide lockdown, which constituted "extraordinary circumstances." Citing the Bombay High Court's directions in Shivsagar Veg Restaurant vs ACIT and the Supreme Court's orders extending the limitation period due to the pandemic, the Tribunal justified the delay in pronouncement. The Tribunal concluded that the period during which the lockdown was in force should be excluded from the 90-day period for pronouncement of orders. Conclusion: The Tribunal allowed the appeal of the assessee on legal grounds, quashing the reassessment order passed by the AO. The procedural delay in pronouncement was justified due to the extraordinary circumstances of the COVID-19 pandemic. The appeal was pronounced in accordance with Rule 34(4) of the ITAT Rules, 1963, by putting a copy on the Notice Board on 30/06/2020 at Amritsar.
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