2019 (10) TMI 660 - AT - Income Tax

Reopening of assessment u/s 147 - validity of reasons to believe - payment of purchases in cash - HELD THAT - Same material which was considered by the AO in the original assessment order was again considered by the AO in the re-assessment order and based on that, the reassessment proceedings were finalized and income of the assessee was computed at ₹ 23,61,000/-. In our considered opinion, once the material/basis was considered and examined by the Assessing Officer in the original assessment proceedings, which is apparent from the finding recorded by the Assessing Officer in paragraph No.3, in our view, it is not permissible for the Assessing Officer for exercising powers u/s. 148 to reopen the assessment u/s. 147. Even in the original assessment, AO has also mentioned that the purchase vouchers were from unregistered concerns and self made and further mentioned that the payments for purchase of material and labour wages were made in cash. Once, the same material was available, then it was not open for the Assessing Officer to reopen the assessment. Case followed M/S. KELVINATOR OF INDIA LIMITED 2010 (1) TMI 11 - SUPREME COURT - Decided in favour of assessee.

Issues:
1. Jurisdiction of invoking provisions of sec. 147 for reopening assessment.
2. Legality of reopening closed assessment u/s 143(3) beyond four years.
3. A.O.'s power to review own order through reopening u/s 147.
4. Legality of belief formed for reopening assessment on mere opinion after four years.
5. Application of sec. 40A(3) in estimating income.
6. Legality of expenditure in cash on purchase and addition sustained.

Issue 1 - Jurisdiction of invoking provisions of sec. 147 for reopening assessment:
The appellant challenged the reopening of assessment u/s 147, arguing that the condition for invoking sec. 147 was not satisfied as the income escapement was not due to failure to disclose material facts. The Tribunal found that the Assessing Officer (A.O.) did not establish any fresh material triggering reassessment. The A.O. had already examined the issue in the original assessment, making it impermissible to reopen the assessment. The Tribunal relied on legal precedents to support its decision, ultimately allowing the appeal.

Issue 2 - Legality of reopening closed assessment u/s 143(3) beyond four years:
The appellant contended that reopening the closed assessment beyond four years under sec. 147 on the same facts considered in the scrutiny assessment was illegal. The Tribunal noted that the A.O. did not present any new evidence for reassessment, using the same material from the original assessment. The Tribunal held that once an issue had been examined in the original assessment, the A.O. could not change his view, citing legal judgments. Consequently, the Tribunal allowed the appeal.

Issue 3 - A.O.'s power to review own order through reopening u/s 147:
The appellant argued that the A.O. could not review his own order through reopening u/s 147, as it was impermissible. The Tribunal found that the A.O. had used the same material in the reassessment as in the original assessment, making it unjustifiable to reopen the assessment. Relying on legal precedents, the Tribunal allowed the appeal, emphasizing that the A.O. cannot change his view once an issue has been examined.

Issue 4 - Legality of belief formed for reopening assessment on mere opinion after four years:
The appellant raised concerns about the belief formed to reopen the assessment after four years based on mere opinion. The Tribunal found that the A.O. did not present any fresh material to warrant reassessment. As the A.O. had already examined the issue in the original assessment, the Tribunal deemed the reopening invalid. Citing legal judgments, the Tribunal allowed the appeal.

Issue 5 - Application of sec. 40A(3) in estimating income:
The appellant contested the application of sec. 40A(3) in estimating income, arguing that it was illegal to sustain an addition under this provision. The Tribunal reviewed the expenses incurred in cash on purchase and found that the A.O. had not provided sufficient justification for disallowance under sec. 40A(3). Consequently, the Tribunal deemed the addition sustained under sec. 40A(3) as illegal and arbitrary.

Issue 6 - Legality of expenditure in cash on purchase and addition sustained:
The appellant challenged the expenditure in cash on purchase and the subsequent addition sustained. The Tribunal examined the circumstances of the cash expenditure and found that the A.O. had not adequately justified the addition. The Tribunal concluded that the addition sustained at a specific amount was illegal and arbitrary. Therefore, the Tribunal allowed the appeal on this issue.

In conclusion, the Tribunal addressed various issues related to the jurisdiction of invoking sec. 147, legality of reopening closed assessments, A.O.'s power to review orders, belief formation for reopening, application of sec. 40A(3) in estimating income, and legality of expenditure in cash on purchase. The Tribunal provided detailed analyses for each issue, citing legal precedents and ultimately allowing the appeal.

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