2015 (11) TMI 1293 - AT - Income Tax

Reopening of assessment - CIT(A) quashed reopening - Held that - CIT(A) has stated on the same page of his order that the AO has not appraised any of the evidence, rendered to in his remand report while framing the order and making assessment and therefore, its conclusion is not based any material in his position and he simply assessed by trade tax authority. After making this disallowance, he held that making an assessment in such a manner is fairly not permissible and is contravention of the judgment of the Hon ble Supreme Court rendered by Ld. AR in his submission. We fail to understand this finding of Ld. CIT(A) after observing this in the preceding para that the reopening was made on the basis of material. Hence, we are of the considered opinion that in the facts of the present case, the orders of the CIT(A) is not sustainable on this issue because when this is accepted by the Ld. CIT(A) that reopening was made on the basis of material indicated by the AO in the remand report reopening of assessment cannot be said to be faulty. - Decided in favour of revenue Unexplained investment on account of sales - CIT(A) deleted the addition - Held that - The reason made by the AO without disposing of the objection of the assessee and on the basis of assessment order passed by the Trade Tax Authority which was set aside and the subsequent order of the Trade Tax Authority has not been brought on record before us. But the relief allowed by the Ld. CIT(A) is also without taking cognizance of the subsequent order of Trade Tax Authority and without referring to the material of 19 pages indicated by the AO in the remand report. Considering all these facts, we feel it proper that this matter should go back to the file of the AO for fresh decision and he pass necessary order as per law. In the light of the above discussion after providing reasonable opportunity of being heard to the assessee and such order of the AO should be speaking and reasoned order. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Validity of quashing the assessment order made under sections 148/143(3) of the IT Act 1961.
2. Deletion of addition of unexplained investment on account of sales.
3. Reopening of assessment based on suspicion.
4. Ambiguity in the questionnaire leading to deletion of addition.

Analysis:

Issue 1: Validity of quashing the assessment order
The Revenue appealed against the order quashing the assessment under sections 148/143(3) of the IT Act 1961. The CIT(A) observed that the reopening was based on material indicated by the AO in the remand report. The CIT(A) found fault with the AO for not appraising the evidence in the remand report while making the assessment. The Tribunal held that if the reopening was based on material, it cannot be considered baseless. The Tribunal concluded that the CIT(A)'s order was not sustainable as the reopening was not faulty, reversing the CIT(A)'s decision and restoring that of the AO.

Issue 2: Deletion of addition of unexplained investment
The CIT(A) deleted the addition of unexplained investment on account of sales, citing ambiguity in the questionnaire. The Tribunal noted a contradiction in the queries regarding stock registers and physical verification. The AO did not address the objection raised by the assessee and based the decision on the assessment order of the Trade Tax Authority, which was set aside. The Tribunal found that the matter should go back to the AO for a fresh decision, emphasizing the need for a reasoned order. The Tribunal allowed Ground No.2 of the Revenue for statistical purposes.

Issue 3: Reopening of assessment based on suspicion
The assessee argued that the reopening of assessment based on mere suspicion was not valid, citing judgments of the Delhi High Court and Tribunal decisions. The Tribunal noted the lack of material for the AO to form a reason to believe that income had escaped assessment. However, the Tribunal did not find the reopening faulty as it was based on material indicated in the remand report.

Conclusion
The Tribunal allowed the Revenue's appeal on the issues of quashing the assessment order and the deletion of the addition of unexplained investment. The matter of unexplained investment was remanded back to the AO for a fresh decision. The Tribunal emphasized the importance of reasoned orders and providing a reasonable opportunity for the assessee to be heard.