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2022 (12) TMI 104 - AT - Income TaxReopening of assessment u/s 147 - Reasons to believe - tangible material showing the escapement of income - assessee made payments in cash excess of Rs.20,000/- to a person in a day - HELD THAT - AO did not mention any tangible material came to its knowledge for reopening and also the failure of the assessee in disclosing fully and truly all the relevant particulars. In similar circumstances the Hon ble Supreme Court in the case of Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT that reopening could be done on fulfillment of two conditions. The Hon ble Supreme Court held that after 01-04-1989 the AO has to power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from other assessment. Further, there must be reasons recorded showing live link with the formation of the belief that there is escapement of income from assessment. In the present case, find no such tangible material came to the knowledge of AO which resulted in a conclusion that there is a escapement of income from original assessment. Further no live link with the formation of such belief that there is a escapement of income from assessment except stating that an examination of ledgers of purchasers. AO has no jurisdiction to reopen the assessment in the absence of any tangible material showing the escapement of income. Thus, the reassessment framed by the AO fails and as confirmed by the CIT(A) is not justified. Ground raised by the assessee is allowed.
Issues:
1. Delay in filing appeal and condonation of delay. 2. Validity of reopening of assessment under section 147 of the Income Tax Act. 3. Additional ground challenging the reopening of assessment. Analysis: Issue 1: Delay in filing appeal and condonation of delay The appellant filed an appeal against the order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2009-10 with a delay of 2 days. The appellant submitted a notarized affidavit explaining the delay, which was found to be bonafide. After considering the reasons provided by the appellant, the delay of 2 days was condoned. Issue 2: Validity of reopening of assessment under section 147 of the Income Tax Act The appellant, a firm engaged in trading, challenged the validity of the reassessment initiated under section 147 of the Act. The Assessing Officer (AO) reopened the assessment based on the suspicion of cash payments exceeding a certain limit to a person in a day. The appellant contended that all relevant information was disclosed during the original assessment and reopening was merely a change of opinion. The AO did not provide tangible material for initiating reassessment, and the audit objection raised later was not a valid basis for reopening. The Tribunal referred to the decision in the case of CIT Vs. Kelvinator of India Ltd., emphasizing the need for tangible material and a live link for reopening assessments. It was observed that the AO lacked jurisdiction to reopen the assessment without concrete evidence of income escapement. The reassessment was deemed invalid, and the additional ground challenging the reopening was allowed. Issue 3: Additional ground challenging the reopening of assessment The appellant raised an additional ground challenging the validity of the reassessment under section 147 of the Act. The Tribunal considered this ground as a legal issue going to the root of the case and allowed its adjudication as a preliminary issue. The Tribunal found that the AO lacked the jurisdiction to reopen the assessment without any tangible material indicating income escapement. As a result of allowing the additional ground challenging the reopening, the main grounds raised by the appellant became infructuous and required no further adjudication. Consequently, the appeal of the assessee was allowed. In conclusion, the Tribunal's decision focused on the lack of tangible material and a live link for reopening the assessment under section 147 of the Income Tax Act. The reassessment was deemed invalid, and the additional ground challenging the reopening was allowed, leading to the overall allowance of the assessee's appeal.
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