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2020 (1) TMI 815 - AT - Income TaxReopening of assessment u/s 147 - Bogus purchases - HELD THAT - CIT(A) considering the submission of the assessee and taking note of the fact that the assessment was completed u/s. 143(3) of the Act originally and during the course of such assessment proceedings assessee has filed all the relevant details in respect of set off of unabsorbed losses and depreciation relating to amalgamating company and also furnished copy of the High Court order approving the scheme of amalgamation, Ld. CIT(A) held that reopening was done merely on change of opinion and not based on any material on record which has come subsequent to completion of the assessment u/s. 143(3) We do not see any valid reason to interfere with the findings and the decision in holding that the reassessment was made merely on change of opinion and quashing the reopening of assessment. None of the findings of the Ld. CIT(A) have been rebutted with evidences by the revenue. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds raised by the revenue.
Issues Involved:
1. Deletion of addition made on account of bogus purchases. 2. Legality of reopening proceedings under Section 147 of the Income Tax Act. 3. Directions given by the CIT(A) after quashing the reopening proceedings. Issue-wise Detailed Analysis: 1. Deletion of Addition Made on Account of Bogus Purchases: The revenue contended that the CIT(A) erred in deleting the addition of ?31,200/- made by the Assessing Officer (AO) on account of bogus purchases from M/s Ritesh Corporation, which was allegedly involved in providing accommodation entries. The CIT(A) found that the AO did not specify the source of information or the details of the statements recorded. The CIT(A) also noted the improbability of a company with a turnover in crores engaging in a bogus purchase for a mere ?31,200/-, resulting in negligible tax benefit. Consequently, the CIT(A) concluded that the reopening of the assessment on this ground lacked merit. 2. Legality of Reopening Proceedings Under Section 147: The revenue argued that the CIT(A) wrongly quashed the reopening proceedings without appreciating that mere calling for information and keeping it on record does not amount to application of mind. The CIT(A) held that the reopening was based on a mere change of opinion without any tangible material. The AO had initially accepted the set-off of unabsorbed losses and depreciation related to the amalgamating company during the original assessment under Section 143(3). The CIT(A) observed that the AO did not provide any new material or evidence that emerged after the original assessment. The CIT(A) referenced the Supreme Court's decision in Kelvinator India Ltd., emphasizing that the AO has no power to review but only to reassess based on tangible material indicating income escapement. The CIT(A) also cited the Bombay High Court’s decision in Export Credit Guarantee Corporation of India Ltd., which held that the jurisdictional requirement of Section 147 is fulfilled if there is an escapement of income due to the AO ignoring relevant material. However, in this case, the CIT(A) found that the AO had considered all relevant details during the original assessment, and thus, the reopening was unjustified. 3. Directions Given by the CIT(A) After Quashing the Reopening Proceedings: The revenue contended that the CIT(A) was wrong in directing the AO to verify records and make necessary rectifications after allowing the appeal on the technical ground that the reopening was bad in law. The CIT(A) had observed that the AO’s reasons for reopening the assessment were not based on any new tangible material but were merely a change of opinion. The CIT(A) concluded that the reopening was invalid, and therefore, the directions for further verification and rectification were unnecessary. Conclusion: The appellate tribunal upheld the CIT(A)'s decision, finding no valid reason to interfere with the quashing of the reopening of the assessment. The tribunal noted that the revenue failed to rebut the CIT(A)'s findings with evidence. As a result, the appeal by the revenue was dismissed, and the order of the CIT(A) was sustained. The tribunal emphasized that the reassessment was indeed based on a change of opinion without any new tangible material, rendering the reopening invalid. Order Pronouncement: The order was pronounced in the open court on January 10, 2020.
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