2020 (12) TMI 1159 - AT - Income Tax

Reopening of assessment - deduction of an amount pertaining to property tax relating to rectification entry of Assessment Year 2005-06 - Whether the said amount pertained to Assessment Year 2005-06, the same should not have been claimed in the computation for the Assessment Year 2006-07? - HELD THAT - AO not only initiated the reassessment proceedings, but also made an addition of this amount under the notion that assessee had claimed a deduction in this year although, this was not any deduction but only a rectification entry for writing back the impugned amount which pertained to Assessment Year 2005-06. Thus, apparently this rectification was tax neutral and no addition/disallowance was warranted for the reason that this amount was never claimed or allowed as a deduction in the earlier year. CIT (A) dismissed the assessee s appeal on an altogether mis-appreciation of the facts of the case as well as law - He went on to observe that if a liability was wrongly provided in a particular Assessment Year, the assessee should have filed revised return for that year. The Ld. CIT (A) also observed that the assessee did not substantiate the working of this amount of ₹ 15,41,18,249/-. In our considered opinion, the Ld. CIT (A) has entirely misdirected himself by making observations which were entirely out of context and leading to an incorrect conclusion being guided by entirely irrelevant logic. Therefore, while setting aside the order of the Ld. CIT (A) on the issue, we hold that the impugned addition was unwarranted in as much as the rectification entry made by the assessee in Assessment Year 2006-07 was tax neutral. We direct the deletion of this addition. - Decided in favour of assessee.

Summary

Issues:
Validity of reassessment proceedings under Section 147 of the Income Tax Act, 1961 for Assessment Year 2006-07.
Merits of the addition of &8377; 15,41,18,249/- made by the Assessing Officer regarding property tax deduction.

Validity of Reassessment Proceedings:
The appeal involved challenging the validity of reassessment proceedings initiated under Section 147 of the Income Tax Act for Assessment Year 2006-07. The Assessing Officer reopened the case based on the belief that the assessee failed to disclose all material facts truly and fully during the original assessment, leading to the alleged escapement of income. The assessee contended that the reopening was invalid as there was no suppression of material facts, and it was merely a change of opinion. The Authorized Representative relied on judicial precedents to support the argument that the reopening was void ab initio.

Merits of the Addition:
Regarding the addition of &8377; 15,41,18,249/- made by the Assessing Officer concerning property tax deduction, the dispute centered on the rectification entry made by the assessee for Assessment Year 2005-06. The tax auditor rectified a mistake where an amount was wrongly shown as a liability, leading to a write-back in the subsequent year, which was Assessment Year 2006-07. The Assessing Officer treated this as a deduction claimed in the current year, resulting in the addition. The Tribunal found that this rectification was tax-neutral, as the amount was never claimed or allowed as a deduction in the earlier year. The Tribunal held that the addition was unwarranted, as the rectification entry was deemed tax-neutral, directing the deletion of the addition.

This detailed analysis of the judgment highlights the issues of the validity of reassessment proceedings and the merits of the addition made by the Assessing Officer, providing a comprehensive overview of the legal arguments and conclusions reached by the Tribunal.