2007 (12) TMI 238 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reopening assessment u/s 147/148.
2. Adequacy of material for reopening assessment.
3. Application of VDIS scheme and its implications.

Summary:

1. Validity of Reopening Assessment u/s 147/148:
The Revenue challenged the order of the learned CIT(A) which cancelled the assessment framed u/s 143(3) r/w s. 147 of the Act. The primary contention was that the assessee did not pay tax on the declaration made under VDIS. The learned CIT(A) quashed the assessment without assigning any reason, despite adequate information with the AO. The Tribunal considered the rival submissions and noted that the assessee filed a declaration u/s 65(1) of VDIS, 1997, but failed to deposit the tax. The AO issued a notice u/s 148 based on information received from the CIT office. The learned first appellate authority held that the reopening was bad in law and cancelled the reassessment, concluding that the AO reopened the assessment only to reinvestigate and verify without any material indicating that income had escaped assessment.

2. Adequacy of Material for Reopening Assessment:
The Tribunal analyzed the reasons for reopening the assessment, which were based on the assessee's failure to pay tax on the VDIS declaration. The assessee relied on the decision in the case of Shri Prem Pal, where it was held that the AO was not justified in assuming jurisdiction u/s 147/148 based on a VDIS declaration for earlier assessment years. The Tribunal found that there was no material with the Department apart from the VDIS documents to justify the belief that income had escaped assessment for the assessment year 1998-99. The Tribunal cited similar cases, including Inder Kumar Bachani, HUF vs. ITO, where it was concluded that the reopening of assessment was unjustified and untenable.

3. Application of VDIS Scheme and Its Implications:
The Tribunal noted that the assessee's declaration under VDIS was for jewellery acquired in the assessment years 1986-87 and 1987-88, not 1998-99. The AO initiated proceedings u/s 147/148 for 1998-99 based on the non-payment of tax on the VDIS declaration. The Tribunal held that the initiation of proceedings was unjustified as there was no material indicating escapement of income for 1998-99. The Tribunal emphasized that the AO's action was merely to investigate the matter further, which was not permissible. Consequently, the Tribunal upheld the conclusion of the learned CIT(A) and dismissed the Revenue's appeal.