2023 (6) TMI 1066 - AT - Income Tax

Reopening of assessment u/s 147 - Unexplained cash credit u/s 68 - assessment proceedings were initiated beyond 4 years - concept of change of opinion - whether assessee was not able to establish the genuineness of transactions and creditworthiness of creditors? - HELD THAT - As during the scrutiny proceedings u/s 143(3) Assessee had already disclosed all the details and facts regarding the share application money on the specific query and considering the fact that the assessment proceedings were initiated on satisfaction borrowed from report of Investigation Wing, in the absence of any whisper or allegation on the Assessee regarding non disclosure of fully and truly all material facts in the reasons, in our considered opinion the proceedings initiated u/s 148 of the Act cannot be sustained. It is well settled law that the AO cannot invoke the provisions of Section 147 148 of the Act merely on the change of opinion wherein the original assessment u/s 143(3) of the Act was completed after due consideration of the facts. Thus reassessment proceedings initiated by the A.O. u/s 147/148 on mere change of opinion and reviewing the completed assessment is contrary to the settled position of law - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition on account of unexplained cash credit under Section 68.
2. Validity of reopening of assessment under Section 147 read with Section 148.

Summary:

Issue 1: Deletion of Addition on Account of Unexplained Cash Credit under Section 68

The Revenue appealed against the CIT(A)'s decision to delete the addition of Rs. 23,16,00,000/- made by the AO on account of unexplained cash credit under Section 68. The AO had added this amount based on the assessee's failure to establish the genuineness of transactions and the creditworthiness of creditors. However, the CIT(A) found that the AO's conclusion that the share application money was accommodation entries was not based on any material fact available on record and directed the deletion of the addition.

Issue 2: Validity of Reopening of Assessment under Section 147 read with Section 148

The assessee challenged the reopening of the assessment, arguing that the initiation of proceedings under Section 147/148 was bad in law as the conditions and procedures prescribed under the statute were not satisfied. The Tribunal noted that during the original assessment proceedings under Section 143(3), the AO had already raised specific queries regarding the share application money, and the assessee had provided detailed responses. The Tribunal emphasized that the reassessment was based on the Investigation Wing's report without any new tangible material indicating that income had escaped assessment due to the assessee's failure to disclose fully and truly all material facts.

The Tribunal cited various judicial precedents, including the Hon'ble Supreme Court's decision in CIT Vs. Kelvinator of India Ltd., which held that reassessment based on a mere change of opinion is invalid. The Tribunal concluded that the reassessment proceedings initiated by the AO were on a mere change of opinion and lacked any new tangible material. Therefore, the reassessment proceedings were quashed, and the assessment order and the order of the CIT(A) were set aside.

Conclusion:

The Tribunal allowed the assessee's cross-objection, quashing the reassessment proceedings under Section 147/148. Consequently, the Revenue's appeal challenging the deletion of the addition under Section 68 became infructuous and was dismissed. The order was pronounced in the open court on 22nd June 2023.