2023 (9) TMI 841 - HC - Income Tax

Reopening of assessment - under-declaration of the investment made - in Block assessment appeal was disposed of in favour of respondent/assessee on the ground that no incriminating material was found in the search and seizure action concerning the unexplained investment in the subject property - Whether merely because certain issues and additions were considered during the block assessment proceedings, which were deleted by the appellate authority on technical grounds, the same, could not form the basis for triggering reassessment proceedings? - HELD THAT - Tribunal has, rightly, sustained the view of the CIT(A). A perusal of the proposed question of law would show that the appellant/revenue has instituted these appeals to agitate that aspect of the matter which relates to the validity of triggering reassessment proceedings, because some of the issues and additions involved were common to the block assessment proceedings as well as the reassessment proceedings. Thus, according to us, on merits, the impugned order needs no interference. The appeals are accordingly closed, with the caveat that the question of law raised by the appellant/revenue is left open.

Summary

Issues involved:
The judgment involves the legality of triggering reassessment proceedings against the respondent/assessee under Section 147/148 of the Income Tax Act, 1961, concerning Assessment Year (AY) 2000-01.

Details of the Judgment:

*Reopening of Assessment:*
The Tribunal sustained the order of the Commissioner of Income Tax (Appeals) on merits and ruled in favor of the respondent/assessee regarding the reopening of assessment under Section 147/148 of the Income Tax Act, 1961. The CIT(A) had found in favor of the respondent/assessee on merits, leading to the deletion of four additions made by the Assessing Officer (AO). The Tribunal confirmed the CIT(A)'s decision on merits and the legality of the reassessment proceedings.

*Background Facts:*
The respondent/assessee is a partnership firm engaged in retail business in garments. A search and seizure operation was conducted under Section 132 of the Act, leading to block assessment proceedings under Section 158BC of the Act. The AO made additions to the respondent/assessee's declared income, triggering reassessment proceedings under Section 147/148 of the Act.

*Reasons for Reassessment:*
The AO issued a notice under Section 148 of the Act based on the discovery of willful under-declaration of investments, non-disclosure of commission, reduction in outstanding loan balance, and introduction of unexplained capital. The CIT(A) had deleted the additions made by the AO, leading to the respondent/assessee's appeal against the validity of the reassessment proceedings.

*Judicial Findings:*
The Tribunal upheld the CIT(A)'s decision to delete the additions, citing lack of incriminating material found during the search and seizure action. The Tribunal concluded that the additions were not sustainable based on the evidence presented. The Tribunal affirmed that the CIT(A)'s findings were justified and did not require interference, closing the appeals with the caveat that the question of law raised by the appellant/revenue remained open for future consideration.

This summary encapsulates the key issues, background facts, reasons for reassessment, and the judicial findings of the High Court's judgment concerning the legality of triggering reassessment proceedings under the Income Tax Act, 1961.