2023 (1) TMI 717 - AT - Income Tax

Reopening of assessment u/s 147 - bogus purchases - Scope of intimation received from ITO, Ward- 9(2), New Delhi - HELD THAT - While passing this reassessment order AO of the assessee was having in hand the information in the form of intimation received from ITO, Ward-9(2), New Delhi about suspicious purchases from M/s. Stans Networking Pvt. Ltd. But the Ld. AO of assessee restricted the reopening and reassessment to the issue of share capital and share premium only and without any indulgence to the information in hand the available about purchases from Stans Networking Pvt. Ltd. Thus, when the first reassessment order was passed on 19.06.2014, as Ld. AO was aware of the fact of scrutiny of the issue of purchases and the assessment concluded u/s 143(3), so quite likely for that reason, there was no action on the intimation letter dated 01.04.2013. AO quite arbitrarily seems to have resurrected the issue by recording reasons available wherein without referring to letter dated 01.04.2013 from ITO, Ward- 9(2), New Delhi. Ld. AO merely reproduced the intimation by referring to the intimation as now, information is received from ITO, Ward-19(3), New Delhi . This astuteness of Ld. AO in not mentioning the date of the intimation makes the reopening reasons tainted with arbitrainess and the satisfaction recorded cannot be considered to be based on any new information. CIT(A) while passing the impugned order sought a remand report with regard to ledger accounts, copy of invoices, copy of bank statements and the physical evidences in the form of photographs of the goods purchased from Stans Networking Pvt. Ltd. and Ld. AO forwarded report to Ld. CIT(A) that in remand proceedings after taking into consideration the evidences, the purchases from Stans Networking Pvt. Ltd. were found to be in order. Still, Ld. CIT(A) preferred to rely the intimation received from ITO, Ward- 9(2), New Delhi to give finding that as that assessing officer has held M/s. Stans Networking Pvt. Ltd. to be accommodation entry provider the reopening was valid. The Bench is of considered opinion that the findings of Ld. ITO, Ward-9(2), New Delhi were not so sacrament so as to brush aside the inquiry and remand proceeding report dated 30.03.2019 submitted by the Ld. AO of the assessee. When the present impugned order was passed on 15.07.2019 the appellate order in the case of M/s. Stans Networking Pvt. Ltd. was already there and that may have been possible reason for the ld. AO of the assessee to have submitted in the remand report dated 30.03.2019 that the purchases from M/s. Stans Networking Pvt. Ltd. are found to be an order. Ld. CIT(A) whimsically ignored the same. Thus, findings of Ld. CIT(A) sustaining the addition on merits is not sustainable.- Decided in favour of assessee.

Summary

Issues:
1. Validity of reopening assessment under section 147/148
2. Jurisdiction and limitation of proceedings under section 147/148
3. Approval under section 151 and its implications
4. Addition to income on account of bogus purchases

Analysis:

Issue 1: Validity of reopening assessment under section 147/148
The appeal challenged the order of the Commissioner of Income Tax (Appeals) regarding the reopening of the assessment under section 147/148. The Assessee contended that the proceedings were initiated on a change of opinion and were without jurisdiction. The Assessee argued that all material facts were disclosed during the original assessment under section 143(3) and no fresh tangible material justified the reopening. The Assessee also pointed out discrepancies in the information received by the Assessing Officer. The Assessee relied on various case laws to support their contentions. The Revenue, however, argued that there was fresh material to justify the reassessment. The Tribunal observed that the factual aspects argued by the Assessee were not controverted by the Revenue. The Tribunal noted that the issue of purchases had been thoroughly examined during the original assessment, and there was no failure on the Assessee's part to disclose relevant information. The Tribunal found that the reassessment was not based on any new information and the reasons for reopening were arbitrary. Consequently, the Tribunal held that the reopening was invalid, and the appeal was allowed.

Issue 2: Jurisdiction and limitation of proceedings under section 147/148
The Assessee raised concerns about the jurisdiction and limitation of the proceedings under section 147/148. The Assessee argued that the approval under section 151 was obtained on misrepresented facts, rendering the proceedings invalid. The Tribunal noted that the Assessee had complied with the requirements during the original assessment and that the reassessment was limited to specific issues without proper justification. The Tribunal found that the reasons for reopening did not establish any failure on the Assessee's part to disclose material facts. The Tribunal also highlighted discrepancies in the information received by the Assessing Officer, leading to a lack of jurisdiction in the reassessment proceedings. As a result, the Tribunal held that the proceedings under section 147/148 were without merit and barred by limitation.

Issue 3: Approval under section 151 and its implications
The Assessee contested the approval obtained under section 151, alleging misrepresentation and lack of verification. The Tribunal found that the satisfaction recorded for reopening the assessment was not based on valid grounds. The Tribunal observed that the Assessee had provided all necessary details during the original assessment, and there was no fresh tangible material to warrant the reassessment. The Tribunal concluded that the approval under section 151 was not justified, further undermining the validity of the reassessment proceedings.

Issue 4: Addition to income on account of bogus purchases
The Assessee challenged the addition to income on account of alleged bogus purchases. The Tribunal reviewed the facts of the case, including the information received by the Assessing Officer and the subsequent reassessment. The Tribunal noted discrepancies in the reassessment process and found that the addition to income was based on surmise and conjecture without credible evidence. The Tribunal emphasized that the purchases had been examined during the original assessment, and there was no valid reason for the addition. The Tribunal, therefore, held that the addition to income was unjustified and ordered it to be deleted.

In conclusion, the Tribunal allowed the Assessee's appeal, setting aside the reassessment and appellate orders. The Tribunal found the reassessment invalid due to lack of jurisdiction, arbitrary reasons for reopening, and unjustified additions to income.