2022 (4) TMI 444 - AT - Income Tax

Reassessment u/s. 147 vide notice of u/s. 148 - Cash withdrawals from bank account wherein huge turnover deposited - HELD THAT - Only information which was available to the AO was that there were turnover of more than ₹ 3 crores out of which there was withdrawal of cash was ₹ 94.97 lacs in the bank account of the assessee. Except the aforesaid information, there was no information available to the Assessing Officer that the income of the assessee in any manner has escaped assessment. Even the Assessing Officer did not correlate the aforesaid transaction in the bank account with the accounts of the assessee to form the belief regarding the escapement of income. Merely that there were huge turnover i.e. deposits and withdrawal in the bank account of the assessee without correlating the same with the accounts and with the nature of the business of the assessee, in our view, that was not enough to form a belief of escapement of income of the assessee for the assessment year under consideration. Even as pointed out by the ld. AR, the reopening was made at the last date of the 6th year from the end of the assessment year under consideration, which was the last day of limitation period for the Assessing Officer to reopen the assessment. As per the settled law, the Assessing Officer should have given opportunity to the assessee to contest the reopening and file objections against the reasons recorded. However, in this case, the reopening was done on the last date of limitation period, therefore, no opportunity to file objections has been granted to the assessee which violates the principles of natural justice. The another point noted by theCIT(A) in the impugned order is that even the Assessing Officer failed to make any addition in respect of aforesaid high turnover. CIT(A) has, therefore, relied upon the decision of CIT Vs. Jet Airways Limited 2010 (4) TMI 431 - HIGH COURT OF BOMBAY wherein it has been held that if the Assessing Officer fails to make any addition on the basis of reasons recorded, the Assessing Officer gets no jurisdiction to add any other item of income - No infirmity in the order of the CIT(A) and the same is upheld. - Decided in favour of assessee.

Summary

Issues:
1. Validity of initiation of assessment u/s. 147
2. Sufficiency of reasons for reopening assessment
3. Opportunity for the assessee to contest reopening

Analysis:
1. The appeal was filed by the Revenue against the order of the National Faceless Appeal Centre under section 250 of the Income Tax Act. The Revenue contended that the initiation of assessment under section 147 was lawful, while the CIT(A) held otherwise. The grounds of appeal raised concerns about the validity of the initiation of assessment under section 147. The Revenue argued that the Assessing Officer had sufficient reasons to believe that the income of the assessee had escaped assessment due to significant differences in turnover.

2. The Counsel for the assessee argued that the assessment year was 2008-09, and the reasons for reopening the assessment were recorded on the last day of the 6th year from the end of the assessment year, denying the assessee the opportunity to contest the reopening. The reasons recorded were deemed insufficient to establish that the income had escaped assessment. The CIT(A) concurred with the assessee's arguments, emphasizing that the reasons provided were inadequate to form a belief of income escapement.

3. Upon reviewing the contentions of both parties and the recorded reasons, the Tribunal found that the information available to the Assessing Officer was limited to turnover and cash transactions in the bank account, without substantial evidence linking it to income escapement. The Tribunal highlighted the Assessing Officer's failure to correlate the bank transactions with the assessee's accounts or business nature. Moreover, the reopening was done on the last day of the limitation period without granting the assessee an opportunity to contest, violating principles of natural justice. Citing precedent, the Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's appeal, emphasizing that if no addition is made based on the recorded reasons, the Assessing Officer lacks jurisdiction to add other income items.

In conclusion, the Tribunal upheld the CIT(A)'s decision, emphasizing the importance of sufficient reasons for reopening assessments and the necessity of providing the assessee with an opportunity to contest such actions.