2023 (1) TMI 281 - HC - Income Tax

Validity of the reopening proceedings - Tangible material available to initiate reopening - HELD THAT - It is clear that on the date when the notice for reopening was issued i.e. on 31st March, 2016 there was no tangible material available in the hands of the assessing officer to justify reopening the assessment. Before us this factual position, as recorded by the Tribunal, could not be assailed by the revenue. Tribunal not stopping with the finding that the reopening of the assessment was bad in law has proceeded to consider the factual position in detail and affirmed the factual finding rendered by the CIT-A. No substantial question of law

Summary

Issues:
1. Validity of reopening assessment for assessment years 2009-10 and 2012-13.
2. Merits of the matter regarding the alleged false losses in commodity trading.

Validity of Reopening Assessment (2009-10):
The High Court considered the issue of the validity of reopening the assessment for the assessment year 2009-10. The Tribunal found that the assessing officer did not have the necessary foundation based on information to believe that income had escaped assessment before issuing the notice for reopening. The appraisal report, which formed the basis for the reopening, was received after the notice was issued. The Court upheld the contention that the AO did not comply with the legal requirement before reopening the assessment, rendering the order passed by the AO without jurisdiction. Consequently, the Court allowed the cross objections taken by the assessee for the assessment year 2009-10.

Validity of Reopening Assessment (2012-13):
For the assessment year 2012-13, the Tribunal examined whether there was tangible evidence or material available to justify the reopening of the assessment. The Court noted that the appraisal report did not provide concrete evidence but rather triggered a reason to suspect. The AO failed to connect the assessee to the alleged wrongdoing as suggested in the appraisal report. The Court held that the initiation of reassessment suffered from legal infirmity as there was no tangible material to believe that income had escaped assessment. The AO's action to reopen was considered based on a change of opinion without any material change in the underlying facts known at the time of the regular assessment.

Conclusion:
The High Court dismissed the appeal filed by the revenue, as there was no substantial question of law arising for consideration. The Court affirmed the findings of the Tribunal regarding the invalidity of reopening assessments for both the assessment years 2009-10 and 2012-13. Consequently, the application for stay was also closed.