2020 (12) TMI 1033 - AT - Income Tax

Reopening of assessment u/s 147 - HELD THAT - AO was not justified to reopen the case of the assessee in view of the provisions u/s 147/148 - No tangible material is on record for reopening the case on the basis of which the AO formed reason to belief that the income has escaped assessment. Mere mentioning the facts as shown by the assessee about the shares premium nowhere gives the plausible reason to the AO to reopen the case u/s 147/148 - Nothing is on record to which it can be assumed that under which circumstances the income of the assessee has become escaped assessment. The other important thing which came into notice that on the basis of similar facts and circumstances the Hon ble ITAT has decided the issue in case titled as Balbir Ispat Pvt. Ltd. 2019 (1) TMI 1840 - ITAT MUMBAI in which the notice u/s 147 of the Act nowhere justified. AO has absolutely no material to even suspect, forget believe that income has escaped assessment. Hence, we quashed the reopening and accordingly, the issue of assessee s appeal on jurisdiction is hereby allowed.

Summary

Issues involved:
1. Challenge to the reopening of assessment u/s 147 of the Act.
2. Dispute over addition u/s 68 of the Act on share application money received.

Detailed Analysis:

Issue No. 1:
The assessee contested the reopening of assessment u/s 147 of the Act, arguing that there was no tangible material to justify it. The AO reopened the case based on the share premium disclosed by the assessee, but the reasons provided did not establish a valid reason to believe that income had escaped assessment. The assessee cited precedents like Khubchandani Healthparks Pvt. Ltd. and Balbir Ispat Pvt. Ltd. to support their case. The Tribunal found that the AO lacked justification for reopening the assessment, as the mere presence of share premium did not indicate income escapement. The Tribunal emphasized the need for tangible material to support reopening, as per legal precedents, and quashed the reassessment proceedings. The appeal challenging the reopening was allowed in favor of the assessee.

Issue No. 2:
The dispute over the addition u/s 68 of the Act on share application money received was also addressed. The CIT(A) confirmed an addition of ?28,00,000 related to investment by Florence Multimedia Pvt. Ltd. The assessee contested this addition, while the revenue challenged the deletion of a larger sum. However, since the assessment proceedings were quashed due to the first issue, the revenue's challenge on the merits of the addition was deemed infructuous. Consequently, the appeal filed by the assessee was allowed, and the revenue's appeal was dismissed.

In conclusion, the Tribunal ruled in favor of the assessee regarding the challenge to the reopening of assessment u/s 147 of the Act, leading to the dismissal of the revenue's appeal on the merits of the addition. The judgment highlighted the necessity of tangible material to support reopening assessments and emphasized adherence to legal precedents in such matters.