2020 (5) TMI 654 - AT - Income Tax

Validity of the reassessment proceedings - approval by the Additional Commissioner of Income Tax - HELD THAT - The material facts of the present case being identical inasmuch as the reopening, beyond any doubt or controversy, is entirely based on the Hon ble Justice M B Shah Commission report, as in the case that SESA STERLITE LTD 2019 (8) TMI 16 - BOMBAY HIGH COURT were dealing with, the ratio of the aforesaid judgment clearly applies on the facts of this case. As a plain look at the reasons recorded for reopening the assessment, as also for the approval by the Additional Commissioner of Income Tax, the only basis for reopening of the present assessment, as in the judgment cited above, was report submitted by Hon ble Justice M B Shah Commission report. Respectfully following the binding judicial precedent, extracts from which are extensively reproduced above, we must hold that the initiation of reassessment proceeding itself, on the facts of this case as evidenced by the reasons recorded by the AO, is unsustainable in law. We, therefore, quash the reassessment proceedings. Order pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown ordered by GOI - HELD THAT - This period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words ordinarily , in the light of the above analysis of the legal position, the period during which lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarifications because of considerable time lag between the point of time when the hearing is concluded and the point of time when the order thereon is being finalized, but then, in our considered view, no such exercise was required to be carried out on the facts of this case.

Summary

Issues Involved:
1. Validity of the reopening of assessment under section 147 of the Income Tax Act, 1961.
2. Procedural compliance regarding the pronouncement of the order beyond the stipulated 90-day period.

Detailed Analysis:

1. Validity of the Reopening of Assessment:

The appellant challenged the reopening of the assessment under section 147 of the Income Tax Act, 1961, arguing that the Assessing Officer (AO) had no reason to believe that any income chargeable to tax had escaped assessment, except for the communication from the Director General of Income Tax (Investigation) Kolkata which referenced the Justice M.B. Shah Commission's report. The Commission's report indicated that the appellant had under-invoiced the export of iron ore by ?11,04,27,609.

The Tribunal noted that the AO had relied solely on the Shah Commission's report to reopen the assessment. The AO's reasons for reopening, as recorded, were based on the Commission's findings of under-invoicing by the appellant. The Additional Commissioner of Income Tax approved the reopening based on these findings.

The Tribunal referenced the judgment of the Hon'ble Bombay High Court in the case of Sesa Sterlite Limited Vs ACIT [(2019) 417 ITR 334 (Bom)], which held that the Shah Commission's report, being an expression of opinion and not a judicial pronouncement, could not form the sole basis for reopening an assessment. The High Court emphasized that the AO must apply his own mind and make his own assessment of facts before issuing a notice under section 148.

The Tribunal found that the reopening in the present case was entirely based on the Shah Commission's report, without any independent assessment by the AO. Therefore, following the binding precedent set by the Bombay High Court, the Tribunal held that the initiation of reassessment proceedings was unsustainable in law and quashed the reassessment proceedings.

2. Procedural Compliance Regarding Pronouncement of Order Beyond 90 Days:

The Tribunal addressed the issue of the delay in pronouncing the order beyond the stipulated 90-day period as per Rule 34(5) of the Income Tax Appellate Tribunal Rules, 1963. The hearing was concluded on 19th February 2020, but the order was pronounced on 27th May 2020, exceeding the 90-day limit.

The Tribunal noted the exceptional circumstances due to the COVID-19 pandemic and the nationwide lockdown imposed on 24th March 2020, which caused unprecedented disruption in judicial work. The Tribunal referenced the Hon'ble Supreme Court's orders extending the limitation period due to the lockdown and the Hon'ble Bombay High Court's order extending the validity of interim orders and time-bound disposals.

The Tribunal interpreted the term "ordinarily" in Rule 34(5) to account for extraordinary situations like the COVID-19 pandemic. It concluded that the period of lockdown should be excluded when computing the 90-day period for pronouncement of orders. Thus, the delay in pronouncing the order was justified due to the exceptional circumstances.

Conclusion:

The appeal was allowed, and the reassessment proceedings were quashed. The Tribunal's order was pronounced beyond the 90-day period due to the COVID-19 pandemic, which was considered an extraordinary circumstance justifying the delay.