2020 (9) TMI 428 - AT - Income Tax

Reopening of assessment u/s 147 - Additions u/s. 68 - proceedings u/s. 153A - HELD THAT - In the reasons recorded mentioned elsewhere the AO observed that income has not been offered to tax in the return of income for A. Y.2011-12 whereas as mentioned elsewhere in all his return of income which clearly mentioned income claimed to be exempt u/s. 10 (38) as mentioned elsewhere the same was thoroughly examined after search operations at the premises of the assessee and after thorough examination the assessment was framed u/s. 153 A therefore, in the light of the decision of CARGO CLEARING AGENCY (GUJARAT) 2008 (8) TMI 86 - GUJARAT HIGH COURT we are of the considered view that reopening of the assessment which was framed u/s. 153 A of the Act is bad in law. AO clearly show that there was no application of mind while issuing of notice u/s. 148 of the Act in as much as had he gone through the assessment records of the assessee he would have seen the computation of income filed with original return income and also with the return of income tax in response to notice u/s. 153 A of the Act. If he had done this exercise he would have known that LTCG has not only been disclosed in the return of income but the same was also claimed to be exempt. Proceedings has been initiated on the basis of no material less any tangible and relevant material and as such reasons recorded do not constitute valid reasons. Moreover the reopening is only on the basis of borrowed satisfaction and as mentioned elsewhere reasons are factually incorrect and the conclusion drawn by the AO in the assessment is contradictory. We hold that the assumption of jurisdiction by the issue of notice u/s. 148 of the Act is bad in law which is quashed and accordingly the assessment so framed is also quashed. - Decided in favour of assessee.

Summary

Issues:
1. Jurisdiction of the AO in initiating proceedings u/s.147 of the Act.
2. Additions made u/s. 68 of the Act on merits.

Analysis:

1. The appellant challenged the jurisdiction of the AO in initiating proceedings u/s.147 of the Act. The AO reopened the completed assessment based on information from the Investigation Wing, suspecting accommodation entries in the form of long-term capital gains. The Tribunal observed that the AO acted on suspicion without valid reasons to believe, as no incriminating material was found during the search. The Tribunal referenced the judgment of the Hon’ble Gujarat High Court, emphasizing the special scheme for assessing undisclosed income for the block period under Chapter XIV-B of the Act. The Tribunal held that the reopening of the assessment was bad in law due to lack of valid reasons and borrowed satisfaction, ultimately quashing the assessment.

2. The appellant also challenged the additions made u/s. 68 of the Act on merits. The AO made an addition of ?76.73 lacs as LTCG, alleging non-disclosure. However, the Tribunal noted that the LTCG was disclosed in the return of income and claimed as exempt u/s. 10(38) after a thorough examination during the search operations. The Tribunal found that the AO did not apply his mind while issuing the notice u/s. 148, as evident from the assessment records. The Tribunal concluded that the proceedings were initiated without tangible and relevant material, with factually incorrect reasons. Following the decision of the Hon’ble Gujarat High Court, the Tribunal held the assumption of jurisdiction by issuing notice u/s. 148 as bad in law, quashing the assessment.

In conclusion, the Tribunal allowed the appeal, quashed the assessment order, and did not delve into the merits of the addition as the assessment itself was invalidated.