2022 (5) TMI 1266 - AT - Income Tax

Reopening of assessment u/s 147 - unexplained investment u/s.69 - Eligibility of reasons to believe - reopening within a period of 4 years - HELD THAT - As per the mandate of law, even where a concluded assessment is sought to be reopened by the A.O within a period of 4 years from the end of the relevant assessment year, it is must that the A.O has fresh material or information with him, that had led to the formation of belief on his part that the income of the assessee chargeable to tax has escaped assessment. Our aforesaid view is fortified by the judgments of NYK Lime (India) Ltd. 2012 (2) TMI 283 - BOMBAY HIGH COURT and Purity Tech Textile Pvt. Ltd. 2010 (2) TMI 26 - BOMBAY HIGH COURT We, thus, in the backdrop of our aforesaid observations not being able to persuade ourselves to subscribe to the order passed by the CIT(Appeals) who had upheld the jurisdiction assumed by the A.O u/s. 147 of the Act, set-aside his order and quash the assessment framed by him u/s. 143(3)/147 of the Act dated Nil for want of jurisdiction. - Appeal of assessee is allowed.

Issues Involved:
1. Validity of jurisdiction assumed by the A.O under Section 147 of the Income Tax Act, 1961.
2. Addition of Rs. 2,75,375/- as unexplained investment under Section 69 of the Income Tax Act, 1961.
3. Disallowance of interest claims and failure to deduct TDS on interest payments.

Detailed Analysis:

1. Validity of jurisdiction assumed by the A.O under Section 147 of the Income Tax Act, 1961:

The primary issue in this case was whether the A.O had validly assumed jurisdiction under Section 147 of the Income Tax Act, 1961, to reopen the assessment. The A.O had originally framed the assessment under Section 143(3) on 13.12.2010, determining the income of the assessee at Rs. 6,02,300/-. Subsequently, the A.O reopened the case under Section 147 on the grounds that certain amounts were not properly accounted for, leading to the belief that income had escaped assessment.

The assessee contended that the reopening was based on a mere "change of opinion" and not on any new material or information. The A.O had relied on the same set of facts that were available during the original assessment. The Tribunal agreed with the assessee, citing the Supreme Court judgment in CIT Vs. Kelvinator of India (2010) 320 ITR 561 (SC), which held that reopening an assessment on the basis of a "change of opinion" is not permissible. The Tribunal concluded that the A.O had merely sought to review the earlier order, which is not allowed under the law. Hence, the Tribunal quashed the assessment framed under Section 143(3)/147 for want of valid jurisdiction.

2. Addition of Rs. 2,75,375/- as unexplained investment under Section 69 of the Income Tax Act, 1961:

The A.O had made an addition of Rs. 2,75,375/- under Section 69, treating it as an unexplained investment. This amount was reflected in the balance sheet under the head "loans, advances & deposits" but was not found in the closing balance of the concerned person, Shri Mahendra Kochar. The assessee argued that this addition was unjustified and unwarranted.

However, since the Tribunal quashed the entire reassessment proceedings due to the invalid assumption of jurisdiction under Section 147, it did not delve into the merits of this specific addition. The Tribunal left this issue open for consideration in any future proceedings that may arise.

3. Disallowance of interest claims and failure to deduct TDS on interest payments:

The A.O had also disallowed various interest claims made by the assessee, totaling Rs. 1,90,008/-, due to discrepancies in the amounts credited and debited in the Profit & Loss account and the failure to deduct TDS on certain interest payments. The A.O had identified specific instances where the interest amounts claimed did not match the confirmations from the lenders and where TDS was not deducted as required under the law.

Again, the Tribunal did not address these issues on merits because it quashed the reassessment proceedings on the grounds of invalid jurisdiction. These contentions were left open for future consideration.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, quashing the reassessment framed under Section 143(3)/147 due to the invalid assumption of jurisdiction by the A.O. The Tribunal emphasized that reopening an assessment based on a "change of opinion" is not permissible under the law, as established by various judicial pronouncements, including those from the Supreme Court and High Courts. Consequently, the Tribunal did not address the other contentions related to the merits of the case, leaving them open for any future proceedings.

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