2019 (9) TMI 778 - HC - Income Tax

Reopening of assessment u/s 147 - nexus between the material available on the record and the A.O.'s satisfaction about escapement of income of the year under consideration - HELD THAT - This Court by the Income Tax Appellate Tribunal Amritsar Bench in its order u/s 256(1) of the Act regarding issuance of notice u/s 148 and initiating reassessment proceedings under Section 147, is answered against the revenue and in favour of the assessee and is further held that the ITAT was not right in law in holding that the proceedings under Section 147 were rightly initiated by the A.O. Addition based document was seized or the seized document - In the light of details filed, bank account statement produced and explanation given by the appellant right from the proceedings under Section 132 (5), 143 (3) and under Section 147/148 in response to queries raised by the authorities below the impugned amount of ₹ 1,35,000/- mentioned by the brother-in-law of the assessee having received on various dates as due for return by him cannot be construed to be relating to the year in which such document was seized as it does not mention any specific date but the appellant has been able to substantiate various dates with amounts sent from time to time in earlier years. Thus we answer this question also referred for our opinion in the negative i.e. against the revenue and in favour of the appellant and hold that in the light of discussions as above and on perusal of various replies and evidence is produced as discussed in various orders of the authorities below that the ITAT was not right in law in holding that though no date of advance of loan or date of investment is available in the said letter the impugned amount of ₹ 1,35,000/- will be the year in which such document was seized or the seized document is found to be in possession of the applicant. Thus, the impugned addition so made of ₹ 1,35,000/- in the year of reference i.e. A.Y. 1988-89 cannot be upheld and the same needs to be deleted.

Summary

Issues involved:
1. Validity of initiation of proceedings under section 147
2. Addition of amount in the assessment
3. Nexus between material available and income escapement
4. Date of advance of loan or investment

Analysis:
1. The judgment pertains to the assessment year 1988-89 and involves questions regarding the initiation of proceedings under section 147. The appellant raised concerns about the validity of initiating proceedings without examining the nexus between the available material and the Assessing Officer's satisfaction about income escapement. The ITAT referred questions to the High Court, questioning the correctness of the initiation of proceedings under section 147. The Court analyzed the facts and contentions, emphasizing the importance of a live link between reasons and belief for income escapement. The Court held that the initiation of proceedings under section 147 was not justified, siding with the assessee against the revenue.

2. The case also involved the addition of an amount of ?1,35,000 to the income of the assessee based on a letter found during a search operation. The Assessing Officer added this amount to the income of the assessee after issuing a notice under section 148. The appellant contended that the addition was not valid as it was based on a document already considered during earlier assessments. The Court examined the evidence and submissions, concluding that the addition of ?1,35,000 in the assessment year 1988-89 was not sustainable. The Court ruled in favor of the appellant, directing the deletion of the impugned amount from the assessment.

3. The judgment highlighted the importance of distinguishing between a 'change of opinion' and 'reason to believe' for initiating reassessment proceedings. The Court referenced relevant legal principles to emphasize that post-April 1989, the power to reopen assessments was wider but required tangible material to establish income escapement. The Court scrutinized the actions of the Assessing Officer, emphasizing the need for a valid reason to initiate reassessment. The Court's analysis focused on the procedural correctness and legal basis for reopening assessments under section 147.

4. Another issue addressed in the judgment was the determination of the date of advance of a loan or investment. The Court considered the details provided by the appellant, including bank statements and explanations, to ascertain the timeline of transactions. The Court concluded that the amount mentioned in the document seized during the search operation could not be attributed to the year of seizure as it lacked specific dates. The Court ruled against considering the seized document as the basis for the addition in the assessment year 1988-89, emphasizing the need for concrete evidence to support such inclusions.