2022 (7) TMI 1207 - AT - Income Tax

Reopening of assessment u/s 147 - AO received information from the DGIT(Inv), Mumbai revealing hawala transactions in bogus purchases - HELD THAT - As the learned lower authorities have not made any disallowance or addition pertaining to the sole reason of reopening. That being the case, we quote CIT vs. Jet Airways 2010 (4) TMI 431 - HIGH COURT OF BOMBAY that such reopening is not sustainable as held that section 147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the Assessing Officer may assess or reassess such income and also any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words and also are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion of Explanation 3 to section 147. In that view of the matter and for the reasons that we have indicated, we do not regard the decision of the Tribunal in the present case as being in error. The question of law shall, accordingly, stand answered against the revenue and in favour of the assessee.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Validity of the impugned reopening under Section 147 of the Income Tax Act, 1961.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal filed by the assessee suffered from an 835-day delay. The delay was attributed to various communication gaps and approval requirements at the official level. The tribunal referred to the landmark decision in Collector, Land Acquisition vs. MST Katiji & Ors. (1987) 167 ITR 471 (SC), which emphasized that the cause of substantial justice must prevail over technical aspects. Consequently, the tribunal rejected the Revenue's objections and condoned the delay, noting that it was neither intentional nor deliberate.

2. Validity of the Impugned Reopening:
The primary legal issue was the validity of the reopening under Section 147 of the Income Tax Act, 1961. The reopening was initiated based on information from the DGIT(Inv), Mumbai, regarding hawala transactions in bogus purchases amounting to Rs. 11,29,218/-. However, the Assessing Officer disallowed excess payments made to members amounting to Rs. 1,29,14,547/-, which was upheld by the CIT(A).

The tribunal observed that the lower authorities did not make any disallowance or addition pertaining to the sole reason for reopening. Citing the case of CIT vs. Jet Airways (2011) 331 ITR 236 (Bom), the tribunal noted that the reopening was not sustainable in law. The tribunal emphasized that the Assessing Officer must assess or reassess the income which he had reason to believe had escaped assessment and also any other income that comes to his notice subsequently during the proceedings. If the income, which was the basis for the formation of the reason to believe, is not assessed or reassessed, it would not be open to the Assessing Officer to independently assess other income that comes to his notice subsequently.

The tribunal referred to the legislative intent and judicial precedents, including the judgments of the Punjab and Haryana High Court, the Kerala High Court, and the Rajasthan High Court. The tribunal concluded that the reopening was invalid as the Assessing Officer did not assess the income which was the basis for the formation of the reason to believe.

Conclusion:
The tribunal quashed the impugned reopening and rendered all other pleadings on merits as academic. The appeal was allowed in the above terms, and the order was pronounced in the Open Court on 14th July, 2022.