2021 (11) TMI 852 - AT - Income Tax

Reopening of assessment u/s 147 - addition account of unexplained investment - HELD THAT - There is no reference to any subsequent facts, i.e., subsequent to assessment of March, 2016, or information coming to the possession of the AO, even if available on record though discovered later, i.e., after 10/3/2016, giving rise to the reason to believe escapement aforesaid, and which is a condition precedent for the issue of notice u/s. 148 and assumption of jurisdiction u/s. 147. The reasons recorded u/s. 148(2) refer to the AO s letter dated 22/2/2016 and the assessee s reply thereto, both events occurring prior to 10/3/2016, i.e., during the course of the original assessment proceedings. Further, the AO s comments to the audit objection make it amply clear that the assessee s reply to his letter dated 22/2/2016 was accepted by the AO. The Revenue has not shown the said acceptance to be infirm, much less perverse, even as the course available in the former case would be a revision u/s. 263. It is also not the Revenue s case that the AO s opinion accepting the assessee s reply was perverse, i.e., a view no person properly instructed on facts and in law could take, as where the said reply is irrelevant or does not meet the letter dated 22/2/2016 by the AO. I am conscious, while so discussing, that there is no challenge to the notice u/s. 148(1) by the assessee, which aspect, i.e., the validity of the reasons recorded u/s. 148(2) or of the assumption of jurisdiction u/s. 147, must, therefore, be regarded as having attained finality. The present discussion only seeks to emphasize the non-sustainability of the argument advanced by the ld. Sr. DR inasmuch as there has been, both factually or legally, no omission to consider the assessee s explanation qua the impugned investment during the original assessment proceedings, nor the AO s view in accepting the said explanation perverse, in which either case the AO s objection to the audit objection would be rendered invalid in law. And the Revenues subsequent action in issuing notice u/s. 148 interpreted, even as argued by the ld. Sr. DR, as an acceptance by the Revenue of the revenue audit objection. Needless to add, the Revenue has not shown me any counter by the RAP to the AO s comments dated 13/4/2016, meeting his objection, so as to exhibit thereby that the audit objection would survive the AO s comments, i.e., obtain despite the same, which (comments) would thus stand rendered inconsequential - Decided against revenue.

Summary

Issues:
- Appeal by Revenue against Order by CIT(A) partly allowing Assessee's appeal contesting assessment under section 147 read with sec.144 of the Income Tax Act, 1961 for Assessment Year 2013-14.
- Justification for deleting addition of ?16,69,585 on account of unexplained investment.
- Validity of Revenue's appeal under exception clause of para 10(c) of Boards' Instruction No. 3/2018 dated 11/07/2018.

Analysis:
1. The appeal was filed by the Revenue against the Order by CIT(A) partly allowing the Assessee's appeal contesting the assessment under the Income Tax Act for the Assessment Year 2013-14. The Revenue questioned the deletion of ?16,69,585 on account of unexplained investment.

2. The validity of the Revenue's appeal was contested under the exception clause of para 10(c) of Boards' Instruction No. 3/2018 dated 11/07/2018. The exception allows appeals to be contested on merits even if the tax effect is below the specified limit if the Revenue Audit objection has been accepted by the Department. The Revenue claimed that the issuance of notice under section 148 implied acceptance of the audit objection.

3. The Tribunal analyzed the audit objection and found that it did not introduce any new material not already considered by the Assessing Officer during the original assessment. The Tribunal noted that the AO's comments clarified that the audit objection was unwarranted as the assessee had explained the investment, and it would be a change of opinion. The subsequent issuance of notice under section 148 was deemed a non-acceptance of the audit objection by the Revenue Audit Party.

4. The Tribunal emphasized that the AO had plenary powers in assessment matters and had accepted the assessee's explanation during the original assessment proceedings. The Tribunal highlighted that there was no subsequent information or facts justifying the issuance of notice under section 148. The Revenue failed to demonstrate any infirmity in the AO's acceptance of the assessee's explanation.

5. Consequently, the Tribunal concluded that the Revenue's appeal did not fall under the exception clause of para 10(c) of the Board Instruction, and thus, it was not maintainable under the Income Tax Act. The Revenue's appeal was dismissed by the Tribunal.

In conclusion, the Tribunal's detailed analysis focused on the validity of the Revenue's appeal under the exception clause of the Board Instruction. By examining the audit objection, the AO's comments, and the issuance of notice under section 148, the Tribunal determined that the Revenue's appeal did not meet the criteria for being considered under the exception clause. The decision was based on the lack of new information justifying the reassessment and the AO's acceptance of the assessee's explanation during the original assessment.