2023 (10) TMI 1311 - AT - Income Tax

Validity of the re-assessment proceedings - reasons to believe - reopening beyond periods of four years - Addition u/s 68 - HELD THAT - Since the issue for reopening was same and during the course of original assessment proceedings, ld. Assessing Officer has issued notices u/s 133(6) to all the share subscribers, who have duly received the same and replied to the said notice u/s133(6) based on which AO was satisfied with the nature and source of the alleged sum. Thus we find that there was no failure on the part of appellant to disclose fully and truly all material facts necessary for reassessment during the course of original scrutiny proceedings. Therefore, the first proviso to section 147 of the Act which requires for recording the reasons to believe is not satisfied because the reasons for reopening have already been addressed by the assessee in the course of original assessment proceedings and such reopening is only based on the change of opinion. As noticed that during the course of original assessment proceedings, the appellant had disclosed all the preliminary facts, which were necessary for completing the assessment. CIT(Appeals) further held that if at the time of original assessment proceedings, the AO has raised wrong inference from the facts disclosed by the appellant, then, appellant cannot be penalized for the wrong inference of facts and law by AO and the assessment of the appellant cannot be reopened after four years from the end of relevant A.Y. once again under section 147 of the Act. In support of this finding, reliance was placed by ld. CIT(Appeals) on the judgment of M/s. Techspan India Private Limited Another 2018 (4) TMI 1376 - SUPREME COURT and M/s. Kelvinator India Limited 2010 (1) TMI 11 - SUPREME COURT - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reassessment proceedings under section 147 read with section 143(3) of the Income Tax Act.
2. Deletion of additions made under section 68 of the Income Tax Act.
3. Violation of principles of natural justice.

Summary:

Issue 1: Validity of Reassessment Proceedings
The Tribunal examined whether the reassessment proceedings initiated under section 147 of the Income Tax Act were valid. The original assessment was completed under section 143(3) on 31.03.2015, and the reassessment was initiated based on the same facts already scrutinized. The Tribunal upheld the CIT(A)'s decision that the reassessment proceedings were invalid as they were based on a mere change of opinion, which is not permissible under the law. The Tribunal referenced the Supreme Court judgments in the cases of ITO vs. Techspan India Private Limited and CIT vs. Kelvinator India Limited, which emphasized that reassessment cannot be based on a change of opinion.

Issue 2: Deletion of Additions under Section 68
The Tribunal reviewed the deletion of additions made by the Assessing Officer under section 68 of the Act. The CIT(A) had deleted the additions of Rs. 13.06 crores and Rs. 16.56 crores in the cases of M/s. Linkstar Promoters Pvt. Limited and M/s. Winner Dealtrade Pvt. Limited, respectively. The Tribunal noted that during the original assessment proceedings, the assessee had provided all necessary documents to prove the identity, creditworthiness, and genuineness of the transactions. The Tribunal agreed with the CIT(A) that there was no failure on the part of the assessee to disclose all material facts fully and truly, and thus, the reassessment was invalid.

Issue 3: Violation of Principles of Natural Justice
The Tribunal also addressed the violation of principles of natural justice. It was found that the Assessing Officer did not provide sufficient opportunity to the assessee to present evidence and explain the transactions during the reassessment proceedings. The CIT(A) observed that the notices under sections 133(6) and 131 were issued at the fag end of the assessment proceedings, giving the assessee an unreasonably short time to respond. The Tribunal upheld the CIT(A)'s decision that the reassessment order was invalid due to the gross violation of the principles of natural justice.

Conclusion:
The Tribunal dismissed the appeals of the Revenue, confirming the CIT(A)'s decision to quash the reassessment proceedings and delete the additions made under section 68. The reassessment was deemed invalid due to being based on a change of opinion, lack of new tangible material, and violation of natural justice principles.