2024 (3) TMI 473 - AT - Income Tax

Reopening of assessment u/s 147 - reasons to believe - As argued Reasons for Reopening do not specify either the Specific issues for which case is sought to be reopened and nor the amount of alleged escapement of income chargeable to tax - HELD THAT - We observe that there is no specific allegation that there is any non-disclosure on part of the assessee during the course of assessment proceedings. In the recent case of PCIT v. DSC Ltd.; 2023 (7) TMI 865 - DELHI HIGH COURT the High Court held that where assessment was ought to be reopened in case of assessee on ground that a search conducted at DSC Group of Companies revealed bogus purchases made by assessee through unexplained sources, since reasons recorded by AO did not make specific allegations of failure to disclose all material facts by assessee, jurisdictional ingredients for reopening assessment provided in first proviso to Section 147 were absent, both in form and substance and, thus, proceedings were bad in law. In the case of Dhirendra Hansraj Singh 2018 (5) TMI 1386 - GUJARAT HIGH COURT High Court held that where after expiry of four years from end of relevant year, Assessing Officer sought to reopen assessment on ground that deduction u/s 80-IB(11A) was wrongly claimed as assessee was engaged in manufacturing and processing of fruit juices and did not derive profits from processing, preservation and packaging of fruits, since there was no failure on part of assessee to disclose fully and truly any material facts which were necessary for assessment, in view of proviso to Section 147, impugned reassessment proceedings deserved to be set aside. We also agree with the contention of assessee that the reasons for reopening also do not specify the amount of income having escaped assessment, so as to extend the period of limitation beyond four years from the end of the relevant assessment year. Where nothing has been brought on record to show that there was failure on part of the assessee to fully and truly disclose all material facts during the course of original assessment proceedings, we are of the considered view that initiation of reassessment proceedings are liable to be stuck down. Appeal of the assessee is allowed.

Summary

Issues Involved:
The issues involved in this judgment include the reopening of assessment under Section 147 of the Act, disallowance of deductions under Section 80P(2)(d) of the Act, confirmation of disallowance of entire deduction under Section 80P(2) of the Act, non-adjudication of unexplained expenditure, levying of interest under Section 234A/B/C/D of the Act, and levying of penalties under Section 270A, 271(1)(b), and 271(1)(c) of the Act.

Reopening of Assessment under Section 147 of the Act:
The appellant challenged the issuance of notice under Section 147 of the Act beyond the prescribed period of four years from the end of the relevant assessment year. The reasons for reopening were found to be vague, scanty, and non-specific, failing to specify the specific issues or the amount of alleged escapement of income chargeable to tax. Legal precedents were cited to support the argument that such vague reasons do not justify reopening. The absence of quantification of the amount of income escaping assessment in the reasons for reopening was also highlighted, indicating a lack of justification for the reopening.

Disallowance of Deductions under Section 80P(2)(d) of the Act:
The Ld. CIT(A) confirmed the action of the Ld. AO in disallowing deductions under Section 80P(2)(d) of the Act in relation to interest earned from cooperative banks and dividends earned from cooperative societies. The appellant contended that the disallowance was not justified, and there was a lack of appreciation for the bifurcation of deductions under Section 80P. The argument was made that the deductions should have been allowed to the extent claimed under Section 80P(2)(c).

Confirmation of Disallowance of Entire Deduction under Section 80P(2) of the Act:
The Ld. CIT(A) confirmed the disallowance of the entire deduction under Section 80P(2) of the Act, amounting to Rs. 40,84,182/-. The appellant argued that the CIT(A) erred in not appreciating the bifurcation of the deduction under Section 80P and should have allowed the deduction to the extent claimed under Section 80P(2)(c). The failure to consider the appellant's submissions and explanations was highlighted as a breach of law and Principles of Natural Justice.

Non-Adjudication of Unexplained Expenditure:
The Ld. CIT(A) did not adjudicate on the issue of unexplained expenditure amounting to Rs. 10,62,90,443/- despite detailed submissions by the appellant on this matter. It was argued that both lower authorities passed orders without properly appreciating the facts and ignored submissions that should have been considered before passing the order. The appellant contended that this failure to address the issue of unexplained expenditure was a clear breach of law and Principles of Natural Justice.

Levying of Interest and Penalties under Various Sections of the Act:
The Ld. CIT(A) confirmed the action of the Ld. AO in levying interest under Section 234A/B/C/D of the Act and penalties under Section 270A, 271(1)(b), and 271(1)(c) of the Act. The appellant challenged these levies on legal and factual grounds, arguing that the authorities erred in law and on facts in confirming these actions. The appellant sought relief from these levies based on legal arguments and procedural irregularities.

Conclusion:
The Tribunal allowed the appeal of the assessee, finding that the initiation of reassessment proceedings was not justified. It was observed that there was no specific allegation of non-disclosure by the assessee during the original assessment proceedings. Legal precedents were cited to support the decision that the reasons for reopening lacked specificity and failed to quantify the amount of income escaping assessment, leading to the conclusion that the reassessment proceedings were not valid.