2016 (10) TMI 310 - AT - Income Tax

Reopening of assessment - Assessing Officer after receiving certain information through AIR data issued notice under section 148 of the Act - Held that - The Assessing Officer in the present case has failed to provide the copy of reasons recorded for reopening of the assessment to the assessee and in view thereof, remedy available with the assessee to object to the reasons recorded for reopening of the assessment and duty of the Assessing Officer to deal with the said objections could not be taken care of. In view of the ratio laid down by the Hon ble Bombay High Court in CIT Vs. Trends Electronics (2015 (9) TMI 1119 - BOMBAY HIGH COURT ), the reassessment order passed in the case of assessee is bad in law. Even otherwise, the Assessing Officer had completed reassessment proceedings against the assessee on the basis that the reasons were recorded in respect of deposit of sum of ₹ 2,29,806/- on 31.03.2007 in savings bank account with HSBC Bank. The assessee was asked to explain the same. However, the exact reasons recorded for reopening the assessment are at variance i.e. information was received from DIT(Systems) in respect of ₹ 2,29,806/- being received from HSBC Bank. The reassessment proceedings were completed against the assessee to explain the deposit of ₹ 2,29,806/- on 31.03.2007, whereas AIR information was in respect of amount received from HSBC Bank. On this ground also, reassessment proceedings completed against the assessee are bad in law and invalid. - Decided in favour of assessee

Summary

Issues Involved:
1. Jurisdiction of re-assessment under section 147/148 of the Income-tax Act.
2. Validity of the notice issued under section 148.
3. Communication of reasons for reopening the assessment.
4. Addition of ?2,29,806/- and disallowance of ?1,11,490/- in the assessment.

Issue-wise Detailed Analysis:

1. Jurisdiction of Re-assessment under Section 147/148:
The primary issue was whether the re-assessment proceedings under section 147/148 of the Income-tax Act were validly initiated. The assessee argued that the assessment framed under section 147 read with section 143(3) was without following due process of law. The Tribunal noted that the Assessing Officer (AO) initiated re-assessment based on AIR data indicating a deposit of ?2,29,806/- in the HSBC Bank, which was not considered in the original return. The AO issued a notice under section 148 after obtaining necessary approval from JCIT under section 151(2). The Tribunal admitted this ground for adjudication in the interest of justice, emphasizing that the reasons for re-assessment must be communicated to the assessee.

2. Validity of the Notice Issued under Section 148:
The assessee contended that the notice under section 148 was time-barred and that reasons for reopening were not communicated. The CIT(A) observed that the notice was issued within time and after due approval, but reasons were not communicated to the assessee. The Tribunal highlighted that the reasons recorded for reopening must be provided to the assessee to allow them to object. The Tribunal found that the reasons were communicated to the assessee only after the appellate order, which invalidated the re-assessment proceedings.

3. Communication of Reasons for Reopening the Assessment:
The assessee requested the reasons for reopening the assessment, which were not provided promptly. The Tribunal referred to the Bombay High Court's ruling in CIT Vs. Trend Electronics, which mandates that reasons for reopening must be furnished to the assessee when sought. The Tribunal noted discrepancies between the reasons recorded for reopening and the reasons mentioned in the assessment order. The initial communication referred to deposits in the HSBC Bank, whereas the exact reasons recorded were about amounts received from HSBC Bank. This variance and the failure to provide reasons promptly invalidated the re-assessment proceedings.

4. Addition of ?2,29,806/- and Disallowance of ?1,11,490/-:
The re-assessment resulted in an addition of ?2,29,806/- and disallowance of ?1,11,490/-. The Tribunal found that the reasons for reopening the assessment were not correctly communicated and were at variance with the actual reasons recorded. The Tribunal concluded that the re-assessment proceedings were invalid due to the failure to provide the correct reasons and the variance in the reasons recorded and communicated. Consequently, the additions made were also invalid.

Conclusion:
The Tribunal allowed the appeal, holding that the re-assessment proceedings were invalid due to the failure to provide reasons for reopening the assessment and the variance in the reasons recorded and communicated. The reassessment order was canceled, and the grounds of appeal raised by the assessee were allowed. The order was pronounced on July 8, 2016.