2021 (9) TMI 620 - AT - Income Tax

Validity of reopening of assessment u/s.148 - Addition u/s 69 - information from DDIT (Investigation) relied upon - reo pening within or beyond period of four years - date of reckoning of four years time limit - Whether four years time limit should be reckoned from the end of the relevant assessment year in which original assessment was completed? - HELD THAT - From the reading of the proviso to Section 147 of the Act it only says where the assessment u/s.143(3) of the Act has been completed, no action shall be taken under this Section after the expiry of four years from the end of the relevant assessment year. The relevant assessment year is A.Y.2006-07. Hence, the four years time limit from said date would expire on 31/03/2011. Since, the notice u/s.148 of the Act in the instant case has been issued on 28/03/2013, the reopening notice has been issued beyond four years from the end of the relevant assessment year. Hence, the first proviso to Section 147 would certainly come into operation in the instant case. Whether there was any failure on the part of the assessee in making full and true disclosure of all material facts before the ld. AO in the original assessment proceedings? - Assessee in response to questionnaire issued by the ld. AO in the original assessment proceedings along with notice u/s.142(1) of the Act dated 14/11/2008, had given a detailed reply vide letter dated 10/12/2008 furnishing the details of additions to fixed assets along with invoices above ₹ 10 lakhs in the prescribed format, as desired by the ld. AO. The ld. AO had verified each and every invoice in the original assessment proceedings and thereafter, concluded that assessee would be entitled for depreciation on fixed assets. This goes to prove that assessee had duly discharged its onus and the same had also been verified and examined by the ld. AO in the original assessment proceedings. While this is so, how can there at all be any failure on the part of the assessee to disclose true and material facts before the ld. AO in the original assessment proceedings. There was no failure on the part of the assessee to disclose the material facts that are material for the purpose of assessment in the original assessment proceedings, by giving full and true disclosure. Addition u/s 69 - As there is absolutely no investment made by the assessee so as to invoke the provisions of Section 69 of the Act. In any case, the allegation of the revenue seems to be that assessee had made purchases of fixed assets from Praj Industries Ltd., by excess value. The entire purchase of fixed assets has already been recorded by the assessee in its books of accounts. The source for making payments for such purchase of fixed assets have also been recorded and disclosed in the same books of accounts. Then, where is the question of applicability of provisions of Section 69 of the Act - The entire investments have been duly explained by the assessee. Hence, there cannot be any addition towards unexplained investment u/s.69 of the Act even on merits. - Decided in favour of assessee.

Issues Involved:
1. Validity of reopening of assessment under Section 148 of the Income Tax Act, 1961.
2. Deletion of addition of ?2,99,98,000 under Section 69 of the Income Tax Act, 1961.
3. Deletion of disallowance of depreciation of ?52,49,650.

Detailed Analysis:

1. Validity of Reopening of Assessment under Section 148:
The assessee challenged the reopening of the assessment under Section 148 on the grounds of non-application of mind by the Assessing Officer (AO) and absence of failure on the part of the assessee to disclose fully and truly all material facts. The original return was filed on 28/11/2006 and revised on 03/04/2008. The original assessment was completed on 22/12/2008. The AO received information from the DDIT (Investigation), Pune on 28/03/2013, leading to the reopening of the assessment. The AO issued the notice under Section 148 on 28/03/2013, beyond the four-year limit from the end of the relevant assessment year (A.Y. 2006-07), making the first proviso to Section 147 applicable.

The Tribunal found that the AO had not independently applied his mind to the information received and had not conducted any enquiry before forming a belief that income had escaped assessment. The Tribunal relied on the decision in South Yarra Holdings v. ITO, emphasizing that the AO must examine the information in the context of the facts of the case and form a reasonable belief independently. The Tribunal concluded that the reopening was based on non-application of mind and was therefore invalid.

2. Deletion of Addition of ?2,99,98,000 under Section 69:
The revenue argued that the addition of ?2,99,98,000 under Section 69 was justified based on the statement of Shri Aniruddha V Phadke and the documents seized during the search of Praj Industries Ltd. The AO alleged that the assessee had inflated the cost of fixed assets purchased from Praj Industries Ltd. and received cash back, facilitating the creation of unaccounted cash and undue depreciation claims.

The Tribunal noted that the statement of Shri Aniruddha V Phadke specifically mentioned only EID Parry India Ltd. and Rhino Agencies Ltd. as parties involved in the overbilling arrangement, with no mention of the assessee. The Tribunal found that the seized documents were "dumb documents" without corroborative evidence involving the assessee. Furthermore, the Tribunal observed that the addition under Section 69 was misplaced as the purchases were recorded in the books, and the source of payments was explained.

3. Deletion of Disallowance of Depreciation of ?52,49,650:
The disallowance of depreciation was linked to the alleged inflated assets. Since the Tribunal found no basis for the addition under Section 69, it concluded that the disallowance of depreciation was also unwarranted.

Conclusion:
The Tribunal allowed the cross objections of the assessee for both years, holding that the reopening of the assessment was invalid due to non-application of mind and absence of failure to disclose material facts. The Tribunal dismissed the revenue's appeals, confirming the deletion of the addition under Section 69 and the disallowance of depreciation. The order was pronounced on 30/08/2021.

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