2020 (5) TMI 85 - AT - Income Tax

Reopening of assessment u/s 147 - assessee made false claim of discount passed on the customers through selfmade vouchers and bearer cheques which was against the facts on record - HELD THAT - Section 143 assessment was completed in respect of discount and rebate which was categorically inquired by the Assessing Officer during the original assessment. All the details were before the AO and after verification only the AO passed original assessment without giving any adverse finding to that effect. Bank statement called for and the information given by the bank to the AO itself reveals that the transaction and the payments were the genuine payments in respect of discount and rebate. There is no doubt or suspicious arise from the perusal of these documents. Merely creating a doubt of the transaction does not suffice the AO to reopen the case u/s 148 - AO has to give proper reasons in case those documents are not at all produced in the original assessment itself. The reasons recorded by the AO u/s 148 are not complete reasons and lack in the context of invocation of Section 148 itself. Therefore, the reopening itself is bad and hence the assessment is bad in law. The appeal of the assessee is allowed. Assessment u/s 153A - HELD THAT - It is pertinent to note that there is no incriminating material shown by the Assessing Officer upon which the addition was made. In fact, the seized ledger accounts pertains to A.Y. 2011-12 only and therefore the said material cannot be held against the assessee for A.Y. 2012-13 and also cannot be termed as incriminating material. While making the additions on these documents, the AO has not specifically pointed out that these expense but has disallowed all these expenses only on ad-hoc basis which is not permissible under the Income Tax Act. Therefore, the additions made itself does not have any foundation as such. Thus, the appeal of the Revenue does not sustain. - Decided against revenue.

Issues:
1. Reopening of assessment u/s 148 without incriminating material
2. Disallowance of rebate and discount given to customers
3. Addition of expenses based on seized documents
4. Disallowance of various expenses in regular assessment
5. Reliance on High Court judgment in assessment decisions

Analysis:

1. Reopening of assessment u/s 148 without incriminating material:
The appellant challenged the reopening of assessment without any incriminating material and after the expiry of the time limit. The appellant argued that the assessment order was arbitrary and against the law. The appellant contended that the assessing officer failed to provide a copy of the incriminating document on which the case was reopened. The tribunal found that the original assessment had already inquired into the rebate and discount claims, and the assessing officer did not raise any adverse findings during the original assessment. The tribunal held that the reasons recorded for reopening were incomplete and lacked proper justification, rendering the reopening itself invalid. Consequently, the tribunal allowed the appeal of the assessee for Assessment Year 2005-06.

2. Disallowance of rebate and discount given to customers:
In the case related to Assessment Year 2005-06, the assessing officer had made an addition based on the appellant's false claim of discount passed on to customers through self-made vouchers and bearer cheques. The appellant contended that all details regarding rebate and discount were submitted during the original assessment, and the assessing officer was satisfied with their genuineness. The tribunal noted that the bank statements and other evidence supported the genuineness of the transactions, and the assessing officer had not raised any doubts during the original assessment. Therefore, the tribunal quashed the addition made by the CIT(A) and allowed the appellant's appeal.

3. Addition of expenses based on seized documents:
Regarding the Assessment Year 2012-13, the assessing officer disallowed various expenses based on seized documents during a search and seizure action. The tribunal observed that there was no incriminating material found during the search that could justify the additions made by the assessing officer. The tribunal noted that the seized ledger accounts pertained to a different assessment year and could not be used against the assessee for the relevant year. The tribunal held that the additions were made on an ad-hoc basis without specific pointing out of expenses, rendering them invalid. Consequently, the tribunal dismissed the Revenue's appeal for Assessment Year 2012-13.

4. Disallowance of various expenses in regular assessment:
The CIT(A) had partly allowed the assessee's appeal by deleting additions related to rebate, transportation, new vehicle expenses, travelling expenses, personal expenses, and disallowance u/s 14A. The Revenue challenged these deletions, arguing that the details provided by the assessee were insufficient to prove the expenses. The tribunal noted that since no incriminating documents were found during the search, the additions made by the assessing officer lacked foundation and were disallowed on an ad-hoc basis. The tribunal upheld the CIT(A)'s decision and dismissed the Revenue's appeal for Assessment Year 2012-13.

5. Reliance on High Court judgment in assessment decisions:
The Revenue contested the CIT(A)'s reliance on a High Court judgment in deleting certain additions. The tribunal found that the seized documents did not contain incriminating material for the relevant assessment year, and the additions were made without proper justification. Therefore, the tribunal upheld the CIT(A)'s decision to delete the additions and dismissed the Revenue's appeal.

In conclusion, the tribunal allowed the assessee's appeal for Assessment Year 2005-06 and dismissed the Revenue's appeal for Assessment Year 2012-13, emphasizing the importance of incriminating material and proper justification for making additions in assessments.

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