2022 (1) TMI 821 - AT - Income Tax

Reopening of assessment u/s 147 - Eligibility of reasons to believe on the basis of which the case of the assessee was reopened u/s 147 - HELD THAT - On a careful perusal of the reasons recorded by the A.O, we are of a strong conviction that in the garb of reopening the case of the assessee he had on the basis of the same set of facts as were available on record and had been deliberated upon by his predecessor at the time of framing of the original assessment tried to substitute his view as against that of his predecessor. In fact, we are unable to comprehend as to what new material or information had came to the notice of the A.O after the framing of the original assessment, which would have justified the reopening of its case. As can safely be gathered from a perusal of the reasons to believe, we are of the considered view that the A.O holding a conviction that his predecessor while framing the regular assessment was in error in accepting the share premium received by the assessee company, which as per him was unexplained, had thus with the sole objective of substituting his view as against that of his predecessor, therein, sought to reopen the case of the assessee company. We are afraid that such a substitution of a view of a successor A.O cannot form a justifiable basis for reopening the case of an assessee. Our aforesaid view is fortified by the judgment of the Hon ble Supreme Court in the case of CIT Vs. Kelvinator of India 2010 (1) TMI 11 - SUPREME COURT wherein the Hon ble Apex Court had observed that merely on the basis of a change of opinion the case of an assessee cannot be . Hon ble High Court of Bombay in the case of Asian Paints Ltd. 2008 (7) TMI 237 - BOMBAY HIGH COURT had observed, that as no new information/material was received by the A.O, therefore, the fresh application of mind by him to the same set of facts and material which were available on record at the time of framing of the assessment but had inadvertently remained omitted to be considered would tantamount to review of order, which is not permissible as per law. Thus as per the mandate of law, even where a concluded assessment is sought to be reopened by the A.O within a period of 4 years from the end of the relevant assessment year, it is must that the A.O has fresh material or information with him that had led to the formation of belief on his part that the income of the assessee chargeable to tax has escaped assessment. Thus we are of the considered view that as the A.O for the reasons discussed at length hereinabove had wrongly assumed jurisdiction and reopened the concluded assessment of the assessee company without satisfying the mandate of law as required u/s 417 of the Act, therefore, the assessment framed by him vide his order passed u/s 144 r.w.s 147, cannot be sustained and is liable to be struck down - Decided in favour of assessee.

Issues Involved:
1. Validity of notice issued under Section 148 of the Income Tax Act.
2. Addition of ?17,00,00,000 as unexplained cash credit under Section 68.
3. Treatment of business loss of ?9,09,65,476 as speculation loss under Explanation to Section 73.
4. Charging of interest under Sections 234A, 234B, and 234D.

Issue-wise Detailed Analysis:

1. Validity of notice issued under Section 148 of the Income Tax Act:
The assessee challenged the validity of the notice issued under Section 148, claiming it was "bad in law" and that the assessment should be quashed. The primary contention was that the reopening of the assessment was done without any new material or information that could form a "bonafide belief" that income had escaped assessment. The assessee argued that the reopening was based on a "change of opinion," which is not permissible. The Tribunal agreed with the assessee, noting that the reasons to believe did not indicate any new material or information. The Tribunal cited the Supreme Court's judgment in ACIT Vs. Rejesh Jhaveri Stock Brokers Pvt. Ltd., emphasizing that reopening requires tangible material. The Tribunal concluded that the reopening was invalid as it was based on the same set of facts considered during the original assessment, thus constituting a change of opinion.

2. Addition of ?17,00,00,000 as unexplained cash credit under Section 68:
The Assessing Officer (A.O) added ?17 crores received as share application money, treating it as unexplained cash credit under Section 68. The A.O observed that the assessee and the share subscribers had the same address and common directors, and were involved in dubious trade practices as per SEBI's orders. The A.O concluded that the assessee failed to provide credible evidence of the nature, genuineness, and creditworthiness of the share applicants. However, since the Tribunal quashed the assessment for lack of jurisdiction, it did not adjudicate on the merits of this issue.

3. Treatment of business loss of ?9,09,65,476 as speculation loss under Explanation to Section 73:
The A.O treated the business loss as speculation loss, invoking the Explanation to Section 73, which the CIT(A) upheld. The A.O noted that the assessee was involved in manipulative circular trading, violating SEBI regulations, and thus, the loss was non-genuine and unlawful. The Tribunal did not adjudicate on this issue due to the quashing of the assessment for lack of jurisdiction.

4. Charging of interest under Sections 234A, 234B, and 234D:
The CIT(A) upheld the A.O's action of charging interest under Sections 234A, 234B, and 234D. The assessee contended that the A.O did not provide an opportunity to contest the interest charges and that the charging of interest was not in accordance with the law. Again, the Tribunal did not adjudicate on this issue as the assessment was quashed for lack of jurisdiction.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the assessment for lack of jurisdiction as the reopening of the assessment under Section 147 was found to be invalid. The Tribunal did not address the merits of the case, leaving the other grounds of appeal open. The order was pronounced on 18.11.2021.

← Previous Next →