2023 (5) TMI 1041 - AT - Income Tax

Reopening of assessment u/s 147 - unexplained investment - contradiction in reasons to believe - whether AO has tangible material in his possession for the purpose of initiating the reassessment proceedings in the case of appellant? - HELD THAT - Reasons recorded and consequent assessment completed are full of contradictions giving wrong figures and wrong names in the case of assessee. It is also noted by ld. CIT (A) that during remand proceedings also, the AO was asked to reconcile the aforesaid figures of amounts and also the names but he failed to do so. CIT (A) s finding that the AO has formed his belief for recording the reasons and reopening the assessment proceedings on the basis of the wrong premise is correct. CIT (A) has properly appreciated the matter and referred to case laws. His order does not need any interference on our part. Hence, we uphold the order of ld. CIT (A). As regards merits of the case, we note that reopening has been found invalid and grounds on merits are only academic interest - Appeal of the Revenue is dismissed.

Summary

Issues Involved:
The issues involved in this case are the validity of reopening of assessment proceedings under section 147 and the subsequent reassessment proceedings, as well as the merits of the case regarding undisclosed income.

Validity of Reopening of Assessment Proceedings:
The case involved a reassessment for the Assessment Year 2009-10 where a sum of Rs.1,95,00,000/- was added as undisclosed income. The assessee challenged the validity and merits of the reassessment before the ld. CIT (A). The reasons for reopening the assessment were based on information received regarding a search and seizure operation in the case of AKN Group, where it was alleged that the assessee had made cash payments for property purchase. However, the ld. CIT (A) found glaring defects in the reasons recorded by the Assessing Officer (AO). The AO had changed figures and names in the reasons recorded, leading to contradictions in the assessment. The ld. CIT (A) held that the AO formed his belief for reopening the assessment on a wrong premise, which was not supported by tangible material. Citing relevant case laws, the ld. CIT (A) concluded that the reassessment proceedings were invalid and without jurisdiction, and subsequently quashed them.

Merits of the Case:
The ld. CIT (A) did not adjudicate on the merits of the case regarding the undisclosed income as the reassessment proceedings were found to be invalid. The AO's failure to establish a proper link between the material in his possession and the belief that income had escaped assessment was highlighted. The AO's casual and arbitrary conduct in forming the belief without accurate facts was criticized. The reassessment proceedings were deemed unsustainable due to being initiated on a wrong premise. The jurisdictional High Court's stance on the seriousness of reopening assessments and the need for tangible material to support the reasons recorded was emphasized. As the reassessment proceedings were quashed, the grounds taken by the appellant on merit were considered academic and not required to be adjudicated.

Conclusion:
After careful consideration of the defects in the reasons recorded and the subsequent assessment, the Appellate Tribunal upheld the ld. CIT (A)'s order, dismissing the appeal of the Revenue. The Tribunal concurred with the finding that the AO had based the reopening of assessment proceedings on a wrong premise, lacking proper justification. As the reassessment was invalidated, the Tribunal did not delve into the merits of the case, as they were deemed of academic interest only.