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2023 (3) TMI 203 - AT - Income TaxReopening of assessment u/s 147 - reason to believe - fresh or intangible material - addition on account of amount paid by the assessee towards release of lease tenancy - HELD THAT - From the very reasons recorded, it is clear that the Assessing Officer has simplicitor gone into assessment records and whatever information filed during assessment proceedings, the Assessing Officer has made basis for reopening of assessment. Admittedly original assessment was completed u/s.143(3) of the Act and the Assessing Officer has examined issue of lease rights release of Rs.18.00 lakhs. I find that this issue has been considered by the Assessing Officer in the original assessment and relevant para 6 of assessment order is already re-produced above in para 8 of this order. Hon'ble Madras High Court in the case of TANMAC India Vs. DCIT ( 2017 (1) TMI 122 - MADRAS HIGH COURT has considered this issue in detail and noted that reassessment can be done only on the fresh and tangible material. The Hon'ble Supreme Court in the case of CIT Vs. Kelvinator of India (supra) has also considered an identical issue and held that Department cannot be permitted to avail of extended time limit, in absence of any new or tangible material. No counter judgement was cited by the Department except case law of the Hon'ble Supreme Court in the case of CIT Vs. P.V.S.Beedies Pvt.Ltd. 1997 (10) TMI 5 - SUPREME COURT wherein the issue of audit objection how to be dealt with and whether that forms opinion or not is to be considered. Since, the Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India 2010 (1) TMI 11 - SUPREME COURT has considered this issue, reopening on the same set of facts, which were available in the original assessment proceedings which were examined by the Assessing Officer, is bad in law and hence, quashed - Appeal of the assessee is allowed.
Issues Involved:
1. Reopening of assessment and assumption of jurisdiction by the Assessing Officer under sections 143(3) read with 148 of the Income Tax Act, 1961. 2. Validity of reassessment without fresh or tangible material. Issue-wise Detailed Analysis: 1. Reopening of Assessment and Assumption of Jurisdiction: The first issue raised by the assessee is against the order of the CIT(A) confirming the action of the Assessing Officer in reopening the assessment under sections 143(3) read with 148 of the Income Tax Act, 1961. The assessee contended that the reassessment was invalid as it was passed out of time, without jurisdiction, and not sustainable both on facts and in law. The original assessment for the assessment year 2013-14 was completed under section 143(3) on 28.03.2016. Subsequently, the Assessing Officer recorded reasons for reopening the assessment on the issue of violation of provisions of section 40A(3) regarding a cash payment of Rs.18.00 lakhs. The reassessment was completed by disallowing the sum of Rs.18,00,000/- under section 40A(3) and making an addition of Rs.22,86,232/- on account of the difference in the value of closing stock. The assessee filed objections against the reopening, but the Assessing Officer confirmed the reopening, stating that there was reason to believe that income chargeable to tax had escaped assessment. The CIT(A) also confirmed the action of the Assessing Officer, observing that the notice under section 148 was valid as it was issued before the completion of four years from the end of the assessment year. The CIT(A) rejected the claim that the addition had been made on some unconnected issue, stating that the addition was made on the issue on which the assessment was reopened. 2. Validity of Reassessment without Fresh or Tangible Material: The learned counsel for the assessee argued that there was no tangible material for reopening the assessment and that fresh and intangible material is required for reopening because the original assessment was completed under section 143(3). The counsel referred to the original assessment order, where the Assessing Officer had already considered the issue in detail. The counsel cited the case of TANMAC India vs. DCIT, where the Hon'ble Madras High Court, following the decision of the Hon'ble Supreme Court in CIT Vs. Kelvinator of India, held that reassessment can only be done on fresh and tangible material. The Tribunal, in the case of M/s. Sabari Foundations Pvt Ltd vs. ITO, quashed the reassessment on identical facts, stating that the Department cannot avail of the extended time limit in the absence of any new or tangible material. The learned Senior DR argued that the reopening was based on an audit objection, which constituted new information. However, the Tribunal noted that the Assessing Officer had simply revisited the assessment records and used the same information filed during the original assessment proceedings as the basis for reopening. The Tribunal found that the issue of lease rights release of Rs.18.00 lakhs was already considered by the Assessing Officer in the original assessment. The Tribunal, following the decisions of the Hon'ble Madras High Court and the Hon'ble Supreme Court, held that reopening on the same set of facts without any new or tangible material is bad in law and quashed the reassessment. Conclusion: The Tribunal allowed the appeal of the assessee, quashing the reassessment on the grounds that there was no fresh or tangible material for reopening the assessment. The Tribunal did not address the other facets of reopening or the merits of the case, as the reassessment was quashed on the primary issue of lack of new or tangible material. The order was pronounced in the open court on 28th February 2023.
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