2017 (11) TMI 1352 - AT - Income Tax

Reopening of assessment - addition u/s 68 - eligible reason to believe - Held that - Assessee disclosed primary facts and information regarding accommodation entry was already with the Department. Therefore, no new material was with the A.O. to form second time the reasons that income chargeable to tax has escaped assessment. There is no failure on the part of the assessee to disclose fully and truly all material facts relevant for the assessment for assessment year under appeal. Therefore, reopening of assessment after expiry of four years from the end of the relevant assessment year is clearly barred by time in this case. The A.O. therefore, did not have any valid reasons for reopening of the assessment and would not get jurisdiction to proceed against the assessee under section 147 of the I.T. Act. We, accordingly, set aside the orders of the authorities below and quash the reopening of the assessment under section 147/148 - Decided in favour of assessee.

Summary

Issues Involved:
1. Reopening of assessment under section 147/148 of the I.T. Act, 1961.
2. Addition of ?65 lakhs under section 68 of the I.T. Act as unexplained cash credit.

Issue-wise Detailed Analysis:

1. Reopening of assessment under section 147/148 of the I.T. Act, 1961:

The assessee filed the original return of income on 2nd December 2003, declaring a loss of ?17,22,956. The return was processed under section 143(1) on 26th February 2003. Subsequently, a reassessment order under section 147 was passed on 26th October 2007, resulting in a loss of ?13,22,956. Another notice under section 148 was issued on 30th March 2010, leading to an ex-parte reassessment order under section 144/147 dated 16th December 2010, adding ?65 lakhs as unexplained cash credit.

The assessee challenged the reassessment order before the Ld. CIT(A), who confirmed the reopening based on fresh information from ADIT (Inv.) and the statement of Shri Harish Pawar. The Tribunal noted that the validity of reopening must be determined with reference to the reasons recorded under section 147/148. The reasons recorded on 25th March 2010 were based on information already available during the earlier reassessment proceedings completed on 26th October 2007. The Tribunal found that there was no new material or tangible information to justify the reopening of the assessment after four years, as required by the proviso to section 147.

The Tribunal observed that the A.O. attempted to correct an incorrect assessment made earlier, which is not permissible under the law. Citing precedents from the Hon’ble Bombay High Court and the Hon’ble Delhi High Court, the Tribunal concluded that the reopening of the assessment was invalid as there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.

2. Addition of ?65 lakhs under section 68 of the I.T. Act as unexplained cash credit:

The A.O. made an addition of ?65 lakhs under section 68 based on the information that the assessee received accommodation entries from Shri Harish Pawar. The assessee disclosed the receipt of ?65 lakhs in the original return, and this information was available with the A.O. during the initial reassessment proceedings. The Tribunal noted that the A.O. did not make this addition in the original reassessment order dated 26th October 2007.

The Tribunal found that the A.O. had no new material to justify the addition of ?65 lakhs in the subsequent reassessment. The Tribunal emphasized that the assessee had disclosed all relevant facts in the original return, and there was no failure on the assessee's part to disclose fully and truly all material facts. The Tribunal concluded that the reopening of the assessment was barred by time and invalid, rendering the addition of ?65 lakhs unsustainable.

Conclusion:

The Tribunal set aside the orders of the authorities below, quashed the reopening of the assessment under section 147/148, and deleted the entire addition of ?65 lakhs. The appeal of the assessee was allowed.