2023 (7) TMI 1487 - AT - Income Tax

Validity of reopening of assessment - notice after four years of the end of relevant assessment year - reasons to believe - independent application of mind or borrowed satisfaction - HELD THAT - We find force in the contention raised by the ld. counsel for the assessee. We find that the AO has reopened the assessment merely based on the information received from investigation wing without verifying the veracity and truthfulness of such information. The information was wrong and the AO reopened the assessment on the basis of borrowed satisfaction without correlating the same with the facts of the case. Even there is no allegation that the income of the assessee has escaped assessment due to non-disclosure of the facts necessary for the assessment and since the assessment has been reopened after four years of the end of relevant assessment year, hence, the exception provided under 1st Proviso to section 147 is attracted. In view of this, the reopening of the assessment is held as bad in law. Assessee appeal allowed.

Summary

Issues:
1. Condonation of delay in filing the appeal.
2. Validity of reopening the assessment beyond the prescribed timeframe.
3. Justification of the additions made by the Assessing Officer.
4. Disallowance of commodity transaction loss.

Condonation of Delay in Filing the Appeal:
The appellant filed an appeal against an order by the CIT(A) dated 23.11.2021, citing a delay in filing. The appellant explained that due to the Covid period, they were unaware of the order as it was uploaded on the Income Tax portal. The delay was deemed unintentional, and the appellant relied on a precedent where a delay was condoned under similar circumstances. The Tribunal, considering the submissions, condoned the delay in filing the appeal.

Validity of Reopening the Assessment:
The appellant contested the validity of the assessment reopening beyond the stipulated period, arguing that the original assessment was conducted under section 143(3) of the Income Tax Act for A.Y 2010-11. The appellant contended that the reopening lacked merit as there was no failure to disclose material facts. The Assessing Officer's reasons for reopening were found to be based on incorrect information, leading to a conclusion that the reopening was unjustified and against the law. The Tribunal agreed with the appellant, holding the reopening of the assessment as bad in law.

Justification of Additions by the Assessing Officer:
The appellant challenged the additions made by the Assessing Officer, claiming that the assessment was reopened without proper grounds. The appellant argued that the Assessing Officer disallowed a loss related to commodity transactions, alleging bogus profits, which was not the case. The Tribunal noted that the reopening was solely based on information from the investigation wing without proper verification, rendering the additions unjustified. Consequently, the appeal of the assessee was allowed.

Disallowance of Commodity Transaction Loss:
The appellant sought relief from the disallowance of a commodity transaction loss of Rs. 50,84,830/-, contending that full details were provided. The Tribunal, after considering the arguments, found in favor of the appellant, holding that the disallowance was not justified given the circumstances. As a result, the appeal of the assessee was allowed, providing the requested relief.

In conclusion, the Tribunal, comprising Shri Sanjay Garg, Judicial Member, and Dr. Manish Borad, Accountant Member, allowed the appeal of the assessee on various grounds, including the condonation of delay, invalidity of the assessment reopening, and unjustified additions made by the Assessing Officer. The decision was rendered on 13th July 2023 in Kolkata.