2025 (1) TMI 568 - AT - Income Tax

Reopening of assessment u/s 147 - addition u/s 68 - unexplained cash credit - assessment as barred by limitation - HELD THAT - Notice u/s 148 for AY 2010-11 has been issued after the expiry of the four years from the end of the relevant assessment year and there is no allegation by the AO in the reasons recorded that escapement of income is due to the failure of the assessee to disclose fully and truly all material facts necessary for assessment, as it evident from the reasons recorded reproduced as above. As in the case of Duli Chand Singania vs. APT 2003 (12) TMI 23 - PUNJAB AND HARYANA HIGH COURT wherein, it has been held that the reassessment cannot be sustained as original assessment was done u/s. 143(3) and four years thereafter reopening was done which is barred by limitation in view of the first proviso to section 147. Reopening is bad in law and barred by limitation in view of the first proviso to section 147 of the Act and therefore, the reassessment order deserves to be quashed. Decided in favour of assessee.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment from the Appellate Tribunal ITAT Delhi primarily revolves around the following core legal issues:

Whether the jurisdiction assumed under Section 147 of the Income Tax Act, 1961, and the consequent issuance of notice under Section 148, was valid and within the statutory time limits.
Whether the addition of Rs. 47,16,500 as unexplained credits under Section 68 of the Income Tax Act was justified.
Whether the interest charged under Section 234D and the withdrawal of interest under Section 244A were lawful.
Whether the principles of natural justice were adhered to during the assessment proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Jurisdiction Assumed under Section 147 and Notice under Section 148

Relevant Legal Framework and Precedents: The legal framework involves Section 147 of the Income Tax Act, which allows the Assessing Officer (AO) to reassess income if it is believed that income chargeable to tax has escaped assessment. The first proviso to Section 147 restricts such action after four years unless there is a failure by the assessee to disclose fully and truly all material facts.
Court's Interpretation and Reasoning: The Tribunal noted that the original assessment was completed under Section 153A(1)(b) read with Section 143(3) on 27.03.2015, and the notice under Section 148 was issued on 30.03.2017, which was beyond the four-year limit. The Tribunal emphasized the absence of any allegation of failure on the assessee's part to disclose material facts.
Key Evidence and Findings: The Tribunal referred to the reasons recorded by the AO, which did not indicate any failure by the assessee to disclose necessary facts. The Tribunal also cited the decision in Duli Chand Singhania vs. APT, which supports the view that reopening after four years without such an allegation is barred by limitation.
Application of Law to Facts: The Tribunal applied the first proviso to Section 147 to conclude that the reopening was barred by limitation as the conditions were not met.
Treatment of Competing Arguments: The Tribunal acknowledged the arguments of the Department Representative but found the legal precedents and statutory provisions in favor of the assessee.
Conclusions: The Tribunal concluded that the reopening of the assessment was invalid and barred by limitation, thus quashing the reassessment order.

Issue 2: Addition of Rs. 47,16,500 as Unexplained Credits under Section 68

Relevant Legal Framework and Precedents: Section 68 of the Income Tax Act deals with unexplained cash credits, allowing the AO to add such amounts to the income of the assessee if they cannot satisfactorily explain the nature and source.
Court's Interpretation and Reasoning: Since the reassessment was quashed on jurisdictional grounds, the Tribunal did not proceed to adjudicate the merits of the addition under Section 68.
Key Evidence and Findings: Not applicable, as the issue became academic following the decision on jurisdiction.
Application of Law to Facts: Not applicable.
Treatment of Competing Arguments: Not applicable.
Conclusions: The Tribunal did not address this issue substantively due to the quashing of the reassessment order.

Issue 3: Interest Charged under Section 234D and Withdrawal of Interest under Section 244A

Relevant Legal Framework and Precedents: Section 234D pertains to interest on excess refund granted, while Section 244A deals with interest on refunds due to the assessee.
Court's Interpretation and Reasoning: As with the unexplained credits, the Tribunal did not examine this issue due to the quashing of the reassessment order.
Key Evidence and Findings: Not applicable.
Application of Law to Facts: Not applicable.
Treatment of Competing Arguments: Not applicable.
Conclusions: The issue was not adjudicated due to the jurisdictional decision.

Issue 4: Adherence to Principles of Natural Justice

Relevant Legal Framework and Precedents: Principles of natural justice require that parties be given a fair opportunity to present their case.
Court's Interpretation and Reasoning: The Tribunal did not delve into this issue as the reassessment was quashed on jurisdictional grounds.
Key Evidence and Findings: Not applicable.
Application of Law to Facts: Not applicable.
Treatment of Competing Arguments: Not applicable.
Conclusions: The issue was not addressed due to the quashing of the reassessment order.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "In the background of the aforesaid discussions and respectfully following the aforesaid precedents, we are of the considered view that the reopening is bad in law and barred by limitation in view of the first proviso to section 147 of the Act and therefore, the reassessment order deserves to be quashed."
Core Principles Established: The Tribunal reinforced the principle that reopening of assessments after four years is barred unless there is a failure by the assessee to disclose fully and truly all material facts necessary for assessment.
Final Determinations on Each Issue: The Tribunal quashed the reassessment order on jurisdictional grounds, rendering other issues moot and academic.

The judgment primarily hinges on the procedural aspect of the reopening of assessment, emphasizing adherence to statutory limitations and procedural fairness.

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