2017 (3) TMI 667 - AT - Income Tax

Validity of reopening of assessment - reasons were not recorded and in fact copy was not supplied to the assessee in order to file its objections - Held that - Letter dated 30th August, 2016 addressed by the DCIT, Circle-3(2), Hyderabad to the Senior Authorised Representative clearly indicate that no such reasons were recorded by the A.O. in the order sheet and, at any rate, the reasons if any, recorded was not served upon the assessee to enable the assessee to file its objections. Even otherwise there is no fresh tangible material to come to the conclusion that income of the assessee has escaped assessment. Under these circumstances while dealing with the scope and ambit of section 147 r.w.s.148 of the Act, reopening of assessment is bad in law. - Decided in favour of assessee

Summary

Issues:
1. Condonation of delay in filing appeal.
2. Validity of reopening of assessment under section 147 of the Income Tax Act.

Condonation of Delay:
The appeal by the assessee-company was against the order passed by the CIT(A)-V, Hyderabad for the A.Y. 2008-2009. The delay in filing the appeal was 218 days, and the assessee sought condonation citing reasons such as the company being dormant, the order being served to an uninformed person, and the whole-time Director being engaged in other activities. The Revenue did not file any material to counter these claims. The Tribunal admitted the appeal, considering the reasonable cause for delay and proceeded to dispose of the grounds raised.

Validity of Reopening of Assessment:
The assessee contended that the reopening of assessment was unlawful as the original return had been processed under section 143(1) and scrutiny assessment completed under section 143(3) without valid reasons for reopening. The A.O. had not recorded reasons for reopening or obtained the assessee's objection. The Ld. CIT(A) upheld the reassessment without adducing any reason. The DCIT confirmed that no reasons were recorded in the order sheet. The Tribunal held that the notice under section 148 was issued without recording reasons, as mandated by the Act. The A.O. claimed the reopening was due to directions from CIT-I, but the Tribunal found no fresh tangible material to support the reassessment. Citing legal precedents, the Tribunal ruled the reopening of assessment as void ab initio, quashed the assessment order, and set aside the CIT(A)'s decision. Consequently, the additions made were not addressed, and the appeal of the assessee was allowed.

In conclusion, the ITAT Hyderabad ruled in favor of the assessee, allowing the appeal due to the delay being condoned and the reopening of assessment being deemed invalid under the Income Tax Act. The Tribunal emphasized the necessity of recording reasons for reopening assessments and the importance of adhering to legal procedures to ensure fair and lawful tax assessments.