2022 (3) TMI 644 - AT - Income Tax

Reopening of assessment u/s 147 - Assessing Officer to usurp the jurisdiction to reopen the assessment - Second Assessing Officer reissuing notice to reassessment - assessment has been reopened after four (4) years from the end of the relevant assessment year and the relevant assessment year (AY 2012-13) has undergone scrutiny assessment under section 153A read with section 143(3) - Unexplained cash credits - reasons recorded by the Assessing Officer to reopen the assessment and test whether the Assessing Officer had successfully usurped the jurisdiction - HELD THAT - Assessing Officer (first) being satisfied about the nature and source of the credit entries from both these companies has accepted the same as genuine and passed the reassessment order under section 153A/143(3) of the Act vide order dated March 31, 2016 Thus we find that the first Assessing Officer had in fact conducted detailed enquiry in respect of these two companies while enquiring about other eleven (11) companies from which the assessee had shown credit entries. First Assessing Officer had confronted the assessee with the adverse report from the very same source which has now prompted the present incumbent/second Assessing Officer to issue notice under section 148 of the Act (i.e. Investigation Wing of the Department, Kolkata). Taking cognisance of the adverse report from the same source the first Assessing Officer had issued show-cause notice dated December 10, 2015 (supra) and alleged that these two companies (M/s. Samkit Finance Pvt. Ltd. and M/s. Saphire Conclave Pvt. Ltd.) were not found to be existing. So it is noted that the first Assessing Officer (Assistant Commissioner of Income-tax) had raised serious doubt about the existence of these two companies based on the Investigation Wing report itself and after conducting enquiry and verification and after approval from Joint Commissioner of Income-tax under section 153D has passed the reassessment order dated March 31, 2016 accepting the nature and source of the credit entries from these two companies also. So we find that the first Assessing Officer has made the reassessment after discharging his duties as an investigator as well as that of an adjudicator. So the action of the Second Assessing Officer to again rake up the same issue which has undergone scrutiny by his predecessor Assessing Officer is nothing but review of the action of first Assessing Officer dated March 31, 2016, which power it is settled that the Assessing Officer (second) does not enjoy. So the impugned actions of the second Assessing Officer can at best be termed as change of opinion after review of earlier assessment which is not a jurisdictional ground to legally/validly usurp reopening jurisdiction. And therefore the action of the second Assessing Officer is held to be bad in law on this score alone. Moreover, we find substantial merit in the contention of the learned authorised representative Shri S. K. Tulsiyan that the second Assessing Officer has believed escapement of income on the strength of borrowed satisfaction of the Investigation Wing without conducting preliminary enquiry which action is also bad in law. Moreover, it is noted that in this case the first proviso to section 147 is attracted, and as discussed supra, the assessee has discharged the burden casted upon it and has disclosed during reassessment dated March 31, 2016 fully and truly all material facts necessary for assessment which culminated in the Assistant Commissioner of Income-tax order dated March 31, 2016 under section 153A/143(3) of the Act. On appeal, the learned Commissioner of Income-tax (Appeals) has gone through the search folder and the remand report of the Assessing Officer and has returned a finding that the assessee has discharged its burden in respect of credit entries from both these companies. Thus we find that the essential condition precedent for invoking reopening jurisdiction under section 147 for the assessment year 2012-13 is absent. Second Assessing Officer has erroneously assumed jurisdiction without satisfying the first proviso to section 147 of the Act also, which also makes the order of second Assessing Officer bad in law. As per the discussion (supra) looking from any angle as discussed, the action of the Assessing Officer to usurp the jurisdiction to reopen the assessment for the assessment year 2012-13 cannot be countenanced and is held to be bad in law for want of jurisdiction and the learned Commissioner of Income-tax (Appeals) erred in holding otherwise. Therefore, we allow the legal issue challenging the jurisdiction of the Assessing Officer and allow the cross-objection of the assessee.

Summary

Issues Involved:
1. Validity of the reopening of assessment under section 147/148 of the Income-tax Act, 1961.
2. Examination of the conditions precedent for reopening after four years.
3. Adequacy of the reasons recorded for reopening.
4. Whether the reopening was based on a "change of opinion."
5. The jurisdiction of the Assessing Officer to reopen the assessment.

Detailed Analysis:

1. Validity of the Reopening of Assessment under Section 147/148:
The appeal concerns the reopening of the assessment for the assessment year 2012-13. The assessee argued that the reopening was invalid as the conditions for initiating proceedings under section 147 were not met. Specifically, the assessment was reopened after four years, and the first proviso to section 147 was applicable, requiring that the income escaped assessment due to the assessee's failure to disclose fully and truly all material facts necessary for the assessment.

2. Examination of Conditions Precedent for Reopening after Four Years:
The assessee contended that the reopening was invalid as the Assessing Officer did not satisfy the additional condition precedent under the first proviso to section 147, which mandates that no action shall be undertaken after four years unless the income escaped assessment due to the assessee's failure to disclose fully and truly all material facts. The assessee had already undergone scrutiny under section 153A/143(3) for the same assessment year, and all material facts were disclosed.

3. Adequacy of Reasons Recorded for Reopening:
The reasons recorded for reopening were based on information from the Deputy Director of Income-tax (Investigation), Kolkata, alleging that the assessee had taken accommodation entries from certain companies. The Tribunal emphasized that the reasons must point to an income escaping assessment and not merely a need for inquiry. The reasons must have a rational connection with the formation of the belief that income has escaped assessment. The Tribunal found that the reasons recorded were not adequate to justify the reopening as they were based on borrowed satisfaction from the Investigation Wing without independent verification.

4. Whether the Reopening was Based on a "Change of Opinion":
The Tribunal noted that the first Assessing Officer had already scrutinized the same issues during the original assessment proceedings under section 153A/143(3) and accepted the nature and source of the credit entries. The reopening by the second Assessing Officer was essentially a review of the earlier assessment, which is not permissible under the law. The Tribunal held that the action of the second Assessing Officer was based on a change of opinion, which is not a valid ground for reopening the assessment.

5. Jurisdiction of the Assessing Officer to Reopen the Assessment:
The Tribunal concluded that the second Assessing Officer did not have the jurisdiction to reopen the assessment as the conditions precedent under section 147, particularly the first proviso, were not satisfied. The Tribunal emphasized that the Assessing Officer must have independent reasons to believe that income has escaped assessment, and such reasons must be based on tangible material. The Tribunal found that the second Assessing Officer's action was without jurisdiction and invalid.

Conclusion:
The Tribunal allowed the cross-objection of the assessee, holding that the reopening of the assessment was invalid for want of jurisdiction. The appeal of the Revenue was dismissed, and the Tribunal emphasized that the power to reopen an assessment does not include the power to review an earlier assessment. The Tribunal's decision underscores the importance of satisfying the conditions precedent for reopening an assessment, particularly when the reopening is sought after four years from the end of the relevant assessment year.