2016 (11) TMI 1234 - AT - Income Tax

Reopening of assessment - accommodation entry receipt - Held that - It is admitted fact that in Para 3 of the reasons recorded the A.O alleged that the entries has to ₹ 85.5. lakhs have been taken during Assessment Year 2003-04 and he is intending to initiate re-assessment proceedings for Assessment Year 2003-04 which is clear non application of mind. In Para 4 also the A.O alleged that the assessee has back unaccounted money of 85.50 lakhs in its business through he accommodation entry and thus there was a failure on the part of the assessee to disclosed fully and truly all material facts necessary for its assessment for AY 2003-04 but the allegations made in Para 3 as stated above, are clearly contradictory and pertaining to Assessment Year 2003-04 relating to Assessment Year 2004-05 which cannot be taken for consideration for re-initiation of re-assessment proceedings and issuance of notice u/s 147 & 148 of the Act for Assessment Year 2003-04. In view of above noted facts and acquisition, we Assessment Year of the considered view that the A.O initiated re-assessment proceedings u/s 147 of the Act and issue notice u/s 148 of the Act in a mechanical and casual manner and by considering the irrelevant and incorrect facts and thus assumption of jurisdiction for initiation of re-assessment proceedings and issuance of notice u/s 147 and 148 of the Act cannot be held as valid and thus we are inclined to quash the same. - Decided in favour of assessee

Summary

Issues involved:
Admission of additional grounds of the assessee challenging the assumption of jurisdiction u/s 147/148 of the Act and the addition made u/s 68 & 69C of the Act.

Analysis:

1. Admission of additional grounds:
The appellant sought to raise additional grounds challenging the assumption of jurisdiction u/s 147/148 of the Act. The Counsel argued that the original grounds did not clearly reflect the grievance of the assessee regarding the reopening of assessment. The Tribunal, considering the Supreme Court's decision in NTPC Ltd. Vs. CIT, allowed the admission of additional grounds, emphasizing the right of the assessee to raise legal issues before the Tribunal. The additional grounds were admitted based on the legal position in favor of the assessee's case.

2. Challenge to the initiation of reassessment proceedings:
The Counsel contended that the Assessing Officer initiated re-assessment proceedings without proper application of mind, pointing out mistakes in the reasons recorded. It was argued that there was no tangible material to justify the assumption of jurisdiction for issuing notice u/s 148 of the Act. Citing decisions of the High Court, it was emphasized that the initiation of re-assessment proceedings should be quashed if reasons were recorded without proper application of mind. The Counsel highlighted discrepancies in the reasons recorded, indicating a lack of nexus between the reasons and the alleged escapement of income.

3. Validity of re-assessment proceedings:
The Assessing Officer alleged that the assessee ploughed back unaccounted money in its business through accommodation entries. However, discrepancies were noted in the reasons recorded, with contradictory statements regarding the amount involved and the relevant assessment year. The Tribunal found the initiation of re-assessment proceedings and the issuance of notice u/s 147 & 148 of the Act to be invalid due to the incorrect facts considered by the Assessing Officer. Consequently, the initiation of re-assessment proceedings was quashed, and the appeal of the assessee was allowed on legal grounds.

4. Merits of the appeal:
Since the reassessment proceedings were quashed, the Tribunal deemed the grounds of the assessee on merits to be academic and dismissed them without further deliberations. The appeal was allowed solely on legal grounds, and the order was pronounced in the Open Court on 05/09/2016.

This detailed analysis outlines the key arguments, legal precedents, and the Tribunal's findings regarding the admission of additional grounds and the challenge to the initiation of reassessment proceedings, leading to the quashing of the proceedings based on the lack of proper application of mind by the Assessing Officer.