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2020 (8) TMI 171 - AT - Income TaxReopening of assessment u/s 147 - Validity of reasons to believe - HELD THAT - Reasons recorded by the ld. AO should speak for itself and there cannot be any addition or alteration to the said reasons and the understanding of the AO at the time of recording reasons cannot be supplemented / strengthened by the subsequent investigations carried out by the department or by subsequent materials that were made available to the department. What is relevant at the time of recording the reasons by the ld. AO is that he should have fresh tangible material without any change of opinion , to enable him to have a live link to form a belief that income of the assessee had escaped assessment and if the reopening is made beyond a period of four years from the end of the relevant assessment year then, it is the incumbent duty on the part of the ld. AO to duly record the fact in the reasons recorded itself that there was a clear failure on the part of the assessee to make full and true disclosure on the facts that are necessary and material for the purpose of assessment before the ld. AO in the original assessment proceedings. In the instant case, that statutory condition has not been complied with by the ld. AO. Hence we deem it fit to quash the entire re-assessment proceedings as void ab initio. We hold that the assumption of jurisdiction in the instant case by reopening the case by the ld. AO is not sustainable in law. Accordingly, the cross objection preferred by the assessee in this regard are allowed. Since, re-assessment framed by the ld. AO is quashed, the adjudication of the various arguments made by the Counsels from both the sides on merits of case in the appeal of the revenue becomes academic.
Issues Involved:
1. Validity of reopening of assessment under Section 147 of the Income Tax Act, 1961. 2. Addition of ?13.50 Crores as unexplained cash credit under Section 68 of the Income Tax Act, 1961. Detailed Analysis: 1. Validity of Reopening of Assessment under Section 147: The assessee challenged the reopening of the assessment under Section 147 of the Income Tax Act, 1961. The original assessment for the A.Y. 2008-09 was completed under Section 143(3) on 30/12/2010. The reopening notice under Section 148 was issued on 26/03/2015, which was beyond the four-year period from the end of the relevant assessment year. The reasons for reopening were based on information regarding bogus accommodation entries provided by Shri Praveen Kumar Jain. However, the reasons recorded by the Assessing Officer (AO) did not mention any failure on the part of the assessee to fully and truly disclose material facts during the original assessment proceedings. The Tribunal found that the assessee had disclosed all necessary facts regarding unsecured loans from five corporate borrowers totaling ?13.50 Crores during the original assessment. The AO had already made inquiries and verified the documents related to these loans. Therefore, the Tribunal held that there was no failure on the part of the assessee to disclose material facts, and the reopening of the assessment was not justified under the proviso to Section 147. The Tribunal cited the jurisdictional High Court decisions in Hindustan Lever Ltd. vs. R B Wadkar and Sound Casting Pvt. Ltd. vs. DCIT, which support the view that reopening beyond four years requires a clear failure to disclose material facts, which was not present in this case. Consequently, the Tribunal quashed the reassessment proceedings as void ab initio. 2. Addition of ?13.50 Crores as Unexplained Cash Credit under Section 68: The AO had added ?13.50 Crores as unexplained cash credit under Section 68, claiming that the assessee failed to prove the identity, creditworthiness, and genuineness of the transactions. However, the CIT(A) deleted the addition on merits, and the revenue appealed this decision. Since the Tribunal quashed the reassessment proceedings, the appeal on the merits of the addition became academic. The Tribunal refrained from giving an opinion on the merits of the case due to the quashing of the reassessment proceedings. Procedural Issue Regarding Pronouncement of Order: The Tribunal addressed the delay in pronouncing the order beyond the 90-day period due to the COVID-19 lockdown. Citing the decision in JSW Ltd. and considering the extraordinary circumstances, the Tribunal extended the time for pronouncement, excluding the lockdown period. Conclusion: The appeal of the revenue was dismissed, and the cross-objection of the assessee was allowed. The reassessment proceedings were quashed, and the Tribunal refrained from adjudicating the merits of the addition due to the quashing of the reassessment. The order was pronounced beyond 90 days due to the COVID-19 lockdown, following the precedent set in JSW Ltd. Order Pronounced: The order was pronounced as per Rule 34(5) of ITAT Rules and by placing the pronouncement list in the notice board on 27/07/2020.
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