2021 (9) TMI 122 - AT - Income Tax

Validity of Reopening of assessment u/s 147 - whether the assessee's taxable income liable to be assessed had escaped assessment or not? - HELD THAT - AO appears to have made a clear cut observation that he needed to verify the facts as to whether the assessee's lands are agricultural or not. And also to ascertain if she had suppressed her receipts or not (supra). We thus quote hon'ble Bombay high court's landmark decision in Hindustan Unilever Ltd. Vs. R.B. Wadkar 2004 (2) TMI 41 - BOMBAY HIGH COURT that re-opening reasons have to be read on stand alone basis without any possibility of addition, deletion or substitution therein at any latter point of time and quash the impugned re-opening itself for having failed to record the appropriate reasons pin pointing escapement of assessee's taxable income from being assessed. Hon'ble apex court's recent landmark judgment in Commissioner of Customs Vs. Dilip Kumar 2018 (7) TMI 1826 - SUPREME COURT also holds that the provisions in the Act have to be strictly construed only. We thus adopt the very principle mutatis mutandis and quash the impugned re-opening/re-assessment in above terms - Decided in favour of assessee.

Summary

Issues: Validity of Section 148/147 proceedings

Detailed Analysis:

The appeal before the Appellate Tribunal ITAT Hyderabad concerned the assessment year 2008-09 and arose from the CIT(A)-5, Hyderabad's order. The issue at hand was the validity of Section 148/147 proceedings initiated by the Assessing Officer. The reopening reasons provided by the Assessing Officer included the receipt of compensation for agricultural lands, lack of disclosure regarding film distribution transactions, and the need to verify if there was suppression of receipts. However, it was noted that the reasons did not clearly indicate whether the assessee's taxable income had escaped assessment. Citing the decision in Hindustan Unilever Ltd. Vs. R.B. Wadkar and Commissioner of Customs Vs. Dilip Kumar, the Tribunal emphasized the importance of recording appropriate reasons pinpointing the escapement of taxable income for a valid reassessment. As the reasons provided were deemed insufficient, the Tribunal quashed the re-opening of the assessment. This decision rendered all other arguments on merits inconsequential, and the assessee's appeal was allowed accordingly.

This judgment showcases the significance of clearly articulating reasons for initiating reassessment proceedings under Section 147/148 of the Income Tax Act, 1961. The Tribunal highlighted the necessity of demonstrating the escapement of taxable income in the reasons recorded for reassessment. By referencing relevant legal precedents, the Tribunal underscored the strict interpretation required for provisions of the Act, emphasizing the need for precision in the grounds for reopening assessments. Ultimately, the Tribunal's decision to quash the re-opening of the assessment underscored the fundamental requirement of establishing a direct link between the reasons provided and the potential escapement of taxable income. The judgment serves as a reminder of the procedural diligence essential in tax assessments and reaffirms the principle of strict adherence to statutory provisions in such matters.