2024 (12) TMI 1046 - AT - Income Tax

Validity of reopening of assessment - notice beyond period of four years - addition u/s 68 - HELD THAT - As per proviso appended to section 147 interdiction provided in it puts an embargo upon the powers of AO to reopen an assessment, in cases where scrutiny assessment was passed u/s 143(3) and four years have expired. AO could reopen such assessment only in the situation if assessee fails to disclose fully and truly all material facts necessary for his assessment for that assessment year. A perusal of the above reasons, AO has nowhere alleged which particular part was not disclosed fully and truly by the assessee. It is pertinent to observe that the assessee has not received any share application money or share premium which was credited to the accounts of the assessee, rather it was holding certain assets in the shape of investment in shares. Those assets have been liquidated in this year. The reason for reopening is totally silent. Whether any asset was possessed by the assessee or not, if possessed when it was acquired, whether the investment made by the assessee in the scrips of certain companies, those were genuine or not in the year of investment. No such things were doubted. Scrutiny assessment has already taken place where all these aspects have been gone into. All such things are totally silent in the reasons recorded by the ld. AO As evaluate the other parts of the reasons recorded by the ld. AO has made reference to a credible information received from the DDIT (Investigation). He has not highlighted either in the reasons or in the assessment order, what is the nature of credible information inspite of the standard operating procedure laid down by the CBDT for supplying details of such information. There is no interweaving of circumstances, which can demonstrate a complete chain of events and such chain of circumstances would goad the ld. Assessing Officer to form a belief that income has escaped assessment. He has narrated all these circumstances vaguely and without interconnecting the circumstances with each other. Whether a man of prudent knowledge can believe on those circumstances that income has escaped assessment. A perusal of the reasons would indicate that no such circumstances have been highlighted, more so it is the ld. Assessing Officer, who has to establish which fact was not disclosed by the assessee during the scrutiny assessment proceedings. The assessee has disclosed that these are the sale of investment which has been credited in the books of account of the assessee. Where is failure? it was the duty of the Revenue to examine whether these sales were bogus. But this was to be done in the regular assessment proceedings carried out under section 143(3) for this assessment year. Therefore, we are of the view that ld. Assessing Officer has reopened the assessment only on the basis of change of opinion and he was not possessing any tangible material to form the belief - We allow the first-fold of contentions raised by the assessee and quash the reopening of assessment. Revision u/s 263 - We find that in the show-cause notice, ld. Commissioner has not specified that assessment order dated 28th September, 2021 passed under section 147 is being sought to be revised. He proposed to revise the assessment order under section 143(3). He has not mentioned the date of the order, which is being sought to be revised, which give rise to a vagueness in the show-cause notice. If original assessment order passed u/s 143(3) is being sought to be revised, then, action of the ld. Commissioner is beyond the time limit provided in sub-clause (2) of section 263. On that ground, this impugned order deserves to be quashed. A perusal of section 147 as was applicable prior to its amendment from 1st April, 2021 would indicate that this section authorizes to assess any other income, which came to the notice of ld. Assessing Officer during the reassessment proceeding. Had this information qua these nine parties was not in the knowledge of ld. Assessing Officer prior to reopening, then, it would have been construed that such information has come in the possession of the ld. Assessing Officer during reassessment proceeding. If ld. Assessing Officer failed to consider that probably ld. PCIT would be justified in taking action under section 263, but here is a case where the information whose non-consideration is being taken as a ground for exercising the powers under section 263 was already possessed by the ld. Assessing Officer before forming his prima facie opinion about escapement of income. In such a situation, it cannot be concluded by the ld. PCIT that assessment order is erroneous, which has caused prejudice to the revenue on account of non-consideration of an information for reopening. By this method, ld. PCIT is revising a second reopening on those very information. Therefore, otherwise on merit also, there is no ground to exercise powers under section 263. Assessee appeal allowed.

Summary

Issues Involved:

1. Reopening of assessment under Section 147 of the Income Tax Act.
2. Addition of Rs. 1,55,00,000/- under Section 68 of the Income Tax Act.
3. Charging of interests under Sections 234A, 234B, and 234C of the Income Tax Act.
4. Revision of assessment order under Section 263 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 147:

The primary issue revolved around the validity of the reopening of the assessment for the Assessment Year 2013-14. The assessee challenged the reopening on the grounds that the notice issued under Section 148 was defective and void ab initio, as it was issued without striking off inapplicable words, indicating non-application of mind. The assessee argued that the reasons recorded for reopening were based on a change of opinion and lacked fresh tangible material. The tribunal observed that the reasons recorded by the Assessing Officer did not establish a live link between the information possessed and the belief that income had escaped assessment. The tribunal noted that the reasons were vague and lacked specificity, failing to demonstrate how the alleged accommodation entries were linked to the assessee. Consequently, the tribunal quashed the reopening of the assessment, concluding that it was based on a mere change of opinion without any tangible material.

2. Addition of Rs. 1,55,00,000/- under Section 68:

The issue of addition of Rs. 1,55,00,000/- was linked to the alleged accommodation entries received by the assessee from certain companies. The tribunal found that the reasons for reopening were not adequately substantiated, and there was no evidence to support the claim that the transactions were not genuine. Since the reopening itself was quashed, the tribunal did not delve into the merits of the addition under Section 68.

3. Charging of Interests under Sections 234A, 234B, and 234C:

The assessee also contested the imposition of interest under Sections 234A, 234B, and 234C. However, the tribunal did not specifically address this issue separately, as the primary focus was on the validity of the reopening of the assessment. With the reopening quashed, the consequential interest charges would not stand.

4. Revision of Assessment Order under Section 263:

The tribunal addressed the revision of the assessment order under Section 263 by the Principal Commissioner of Income Tax (PCIT). The PCIT sought to revise the assessment on the grounds that the Assessing Officer failed to make additions for amounts received from certain parties. The tribunal noted that the show-cause notice issued by the PCIT was vague and did not specify which order was being revised. Furthermore, the tribunal highlighted that the reassessment order had already been quashed, rendering the foundation for revision non-existent. The tribunal also observed that the information possessed by the Assessing Officer was considered during the reopening process, and the PCIT's action under Section 263 was unjustified. Consequently, the tribunal quashed the order under Section 263.

Conclusion:

The tribunal allowed both appeals of the assessee, quashing the reopening of the assessment and the revision order under Section 263. The tribunal emphasized the need for clear and specific reasons for reopening assessments and highlighted the importance of adhering to procedural guidelines to ensure the validity of such actions.