2022 (1) TMI 644 - AT - Income Tax

Validity Reopening of assessment u/s 147 - new tangible material before the assessing officer to reopen the concluded proceedings - Notice beyond period of four years - HELD THAT - It is evidently clear that in original assessment u/s. 143(3) r.w.s. 153A of the Act, for assessment year 2007-08, dated 24/12/2010, the assessing officer had examined the issue relating to M/s. AZ Jewels. Hence, in the reassessment proceedings, there was no any new tangible material before the assessing officer to reopen the concluded proceedings. We note that in reassessment proceedings, the assessing officer targeted the transaction relating to M/s. AZ Jewels, which had already been examined by the assessing officer in the original assessment proceedings. On appeal by the department to the Supreme Court in M/S. KELVINATOR OF INDIA LIMITED 2010 (1) TMI 11 - SUPREME COURT ) it was held that though the power to reopen under the amended section 147 is much wider, one needs to give a schematic interpretation to the words reason to believe failing which section 147 would give arbitrary powers to the AO to re-open assessments on the basis of mere change of opinion , which cannot be per se reason to re-open. One must also keep in mind the conceptual difference between power to review and power to re-assess. The AO has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfilment of certain pre-condition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. Thus, based on these facts we note that reassessment proceedings initiated by the assessing officer are not in accordance with the provisions of section 147. Reassessment proceedings were initiated after the expiry of four years. We note that scrutiny assessment has been completed in the case of the assessee for the assessment year 2007-08, vide order u/s. 143(3) r.w.s. 153A dated 24-12-2010 accepting the returned income and therefore, the impugned notice issued u/s. 148 of the Act on 27-03-2014, is beyond the statutory period of 4 years, from the end of the relevant assessment year ending on 31-03-2012, which is ab-initio void; since there is no failure on the part of the assessee to disclose fully and truly all the material facts necessary to complete the original assessment. Thus, reassessment proceedings are bad in law. No failure on the part of the assessee to disclose fully and truly all the material facts necessary to complete the original assessment, hence reassessment proceedings needs to be quashed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of reopening of assessment under Section 148 of the Income Tax Act, 1961.
2. Sustaining of addition of ?20,00,000/- under Section 68 of the Income Tax Act as unexplained cash credit.

Issue-wise Detailed Analysis:

1. Legality of Reopening of Assessment under Section 148:

The assessee challenged the reopening of the assessment on the grounds that it was illegal and bad-in-law since the regular assessment had already been concluded under Section 143(3) of the Act, and the reopening was initiated after the statutory period of four years. The assessee argued that there was no failure on their part to disclose fully and truly all material facts necessary for the assessment during the original proceedings. The Assessing Officer (AO) had reopened the case based on information received from the Investigation Wing regarding bogus entries of unsecured loans and advances by Bhawarlal Jain Group, with the assessee being one of the beneficiaries.

The Tribunal noted that the original assessment under Section 143(3) r.w.s. 153A was completed on 24.12.2010, and the reopening notice under Section 148 was issued on 27.03.2014, beyond the statutory period of four years. The Tribunal emphasized that the AO had already examined the issue of unsecured loans from AZ Jewels during the original assessment proceedings, and there was no new tangible material to justify the reopening. The Tribunal cited the judgment in CIT vs. Kelvinator of India Ltd., which held that mere change of opinion does not justify reopening an assessment. The Tribunal concluded that the reassessment proceedings were not in accordance with the provisions of Section 147 of the Act and were initiated merely on a change of opinion, hence, they were quashed.

2. Sustaining of Addition of ?20,00,000/- under Section 68:

Since the Tribunal quashed the reassessment proceedings, it rendered the issue of sustaining the addition of ?20,00,000/- under Section 68 as academic and infructuous. The addition was initially made by the AO on the grounds that the unsecured loan received by the assessee from AZ Jewels was treated as unexplained cash credit. However, as the reassessment itself was quashed, the merits of this addition were not further examined.

Conclusion:

The Tribunal allowed the appeal of the assessee, quashing the reassessment proceedings initiated by the AO under Section 148, as they were based on a mere change of opinion without any new tangible material and were initiated beyond the statutory period of four years. Consequently, the addition of ?20,00,000/- under Section 68 was also rendered academic and infructuous. The order was pronounced on 06/01/2022.