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2023 (6) TMI 261 - AT - Income TaxValidity of reopening of assessment u/s 147 - assessment beyond a period of 4 years - mandation of recording satisfaction - HELD THAT - From a reading of the reasons for belief of escaping the income and reopening of the assessment which are reproduced hereinabove, it is not possible for us to decipher that the AO has recorded that there was any failure on the part of the assessee to disclose fully and truly all the material facts. AO is conspicuously silent on the above said aspect. Once the AO has not mentioned that the assessee has failed to disclose fully and truly all material facts, necessary for completion of the assessment, the re-opening cannot be made in the eyes of law and we are in agreement with the decision cited by AR in the case of Bhor Industries 2003 (2) TMI 8 - BOMBAY HIGH COURT and PCIT Vs. Lanco Hills 2022 (12) TMI 802 - TELANGANA HIGH COURT Thus reopening made by the AO is not in accordance with the law and the consequential assessment made by the AO is also bad in law. A conclusion may be drawn that the reopening was made beyond a period of 4 years without recording satisfaction by the CIT. The satisfaction/approval reproduced hereinabove have been accorded by the authorities in a mechanical manner on 19.03.2011, without looking into the proposal dt. 26.03.2011 by the ACIT and without considering the proposal of the AO dt.19.03.2012. Firstly, there was no reason for the ACIT to recommend the case of the AO for reopening u/s 147 - CIT was duty bound to independently apply his mind and come to the satisfaction that the said case was a fit case for reopening of the assessment beyond a period of 4 years. The satisfaction as contemplated u/s 151 of the Act is not an empty formality as the authorities have to apply their mind and record satisfaction. When the authorities were not oblivious to the date of proposal then it cannot be said that they have applied their mind or considered the proposal of the AO in its right earnest. In our view, if the officers have not even seen the date when it was proposed by the AO, the question of examining other record at the time of recording the satisfaction does not arise and hence, we can safely presume that the CIT has not applied his mind to the proposal of the AO while recording the satisfaction - Decided in favour of assessee.
Issues Involved:
1. Reopening of assessment under Section 147/148 of the Income Tax Act. 2. Treatment of sale of partly paid-up shares. 3. Addition towards difference in interest. 4. Addition of prior period income. 5. Disallowance of depreciation on discarded assets. 6. Addition on account of assets discarded or written off. Summary: Issue 1: Reopening of Assessment under Section 147/148 The assessee argued that the reopening of the assessment was beyond the period of four years and without the necessary satisfaction of the Commissioner of Income Tax (CIT). The Tribunal admitted the additional grounds raised by the assessee, citing the Supreme Court's decision in National Thermal Power Co. Ltd. vs. CIT [229 ITR 383] (SC), which allows the Tribunal to entertain new grounds going to the root of the matter. The Tribunal found that the Assessing Officer (AO) had not recorded that there was any omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal concluded that the reopening was not in accordance with law and quashed the reassessment proceedings. Issue 2: Treatment of Sale of Partly Paid-Up Shares The assessee contended that the CIT(A) erred in treating the sale of partly paid-up shares as fully paid and confirming the addition of Rs. 50,14,625/- as long-term capital gain. The Tribunal, having allowed the additional grounds on the reopening issue, did not address this issue on merits as it became infructuous. Issue 3: Addition Towards Difference in Interest The assessee argued that the CIT(A) erred in confirming the addition of Rs. 27,69,422/- towards the difference in interest. The Tribunal did not address this issue on merits due to the allowance of the additional grounds on the reopening issue. Issue 4: Addition of Prior Period Income The assessee contended that the CIT(A) erred in confirming the addition of the difference of prior period income of Rs. 1,26,71,371/-. This issue was also not addressed on merits by the Tribunal due to the allowance of the additional grounds on the reopening issue. Issue 5: Disallowance of Depreciation on Discarded Assets The Revenue argued that the CIT(A) erred in deleting the disallowance of depreciation on discarded assets amounting to Rs. 21,25,929/-. The Tribunal, having allowed the additional grounds on the reopening issue, rendered this issue infructuous. Issue 6: Addition on Account of Assets Discarded or Written Off The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 1,42,37,594/- made by the AO on account of assets discarded or written off. This issue was also rendered infructuous by the Tribunal's decision on the reopening issue. Conclusion: The Tribunal allowed the appeal of the assessee on the additional grounds related to the reopening of the assessment, and as a result, the grounds raised by the assessee on merits and the appeal filed by the Revenue were rendered infructuous. The Tribunal quashed the reassessment proceedings and dismissed the appeal of the Revenue.
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