2024 (12) TMI 1376 - AT - Income Tax

Reopening of assessment - Addition u/s 68 - non considering assessee's objections against reopening - HELD THAT - The assessee had demanded reasons for reopening. On receipt of reasons, the assessee filed detailed objections. None of the objections were dealt with by Ld. AO and no formal speaking order was passed accepting or rejecting the objections raised by the assessee. As in the case of Jayanthi Natarajan 2017 (9) TMI 1042 - MADRAS HIGH COURT as relying on GKN Driveshafts (India) Ltd. 2002 (11) TMI 7 - SUPREME COURT categorically held that in case the objections were not disposed-off by way of speaking order then it amounts to violation of natural justice and the assessment proceedings are vitiated as null and void. The present case was on identical facts. AO, in assessment order dated 26-03-2013, made addition on account of land purchase, cash payment for land purchase and disallowed expenses. The loan taken from aforesaid entity was accepted and no addition was made in respect thereof. Clearly, an opinion was formed on the issue of advance received from SRSR. Having satisfied with assessee s submissions, in this regard, Ld. AO chose not to make any addition in that respect. The same is further evidenced by the fact that the aforesaid order was subjected to revision u/s 263. The revisionary authority, upon perusal of case records, flagged issue only with respect to another entity M/s Pacific Chennai Infrastructure Pvt. Ltd. However, no discrepancy was noted with respect to transaction carried out with SRSR. In such a case, the second reopening was nothing but triggered on mere change of opinion which is impermissible in law. Addition u/s 68 - We concur with the adjudication of Ld. CIT(A) that the assessee had duly discharged the onus u/s 68 to establish the identity of the lender, its creditworthiness as well as genuineness of the transactions. The debt was settled subsequently and no case of addition u/s 68 could be made out against the assessee. No addition could be made merely on the basis of suspicion, conjectures and surmises. Therefore, we see no reason to interfere in the impugned order on merits also.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions addressed in this judgment include:

Whether the reopening of assessment proceedings under Section 147 of the Income Tax Act was justified or void ab initio.
Whether the assessee made a full and true disclosure of material facts during the original assessment proceedings.
Whether the reassessment proceedings were based on a mere change of opinion by the Assessing Officer (AO).
Whether the addition of Rs. 25.11 Crores to the assessee's income as 'income from other sources' was justified.
Whether the assessee discharged the onus under Section 68 to establish the identity, creditworthiness, and genuineness of the transactions with the creditor.

2. ISSUE-WISE DETAILED ANALYSIS

Reopening of Assessment Proceedings

Relevant Legal Framework and Precedents: The reopening of assessments is governed by Section 147 of the Income Tax Act, which requires the AO to have a 'reason to believe' that income has escaped assessment. The Supreme Court in Techspan India Pvt. Ltd. and Kelvinator of India Ltd. emphasized that this cannot be based on a mere change of opinion.
Court's Interpretation and Reasoning: The Tribunal found that the AO's action was based on a change of opinion, as the facts were already considered in the original assessment. The AO failed to provide new tangible material to justify the reopening.
Key Evidence and Findings: The original assessment included scrutiny of the transactions with SRSR, and no discrepancies were noted. The reopening was triggered without new evidence.
Application of Law to Facts: The Tribunal applied the principle that reassessment should not be used as a tool for review and found the reopening unjustified.
Treatment of Competing Arguments: The Revenue argued for the validity of reopening based on alleged non-disclosure, but the Tribunal held that the AO's failure to address objections and lack of new evidence rendered the reassessment void.
Conclusions: The reopening was quashed as void ab initio due to being based on a mere change of opinion and procedural lapses by the AO.

Full and True Disclosure

Relevant Legal Framework and Precedents: Section 147 requires full and true disclosure by the assessee. The Tribunal referred to precedents like Jayanthi Natarajan regarding procedural fairness.
Court's Interpretation and Reasoning: The Tribunal found that the assessee had disclosed all material facts during the original proceedings, and the AO had accepted the transactions.
Key Evidence and Findings: The assessee provided all necessary documents during the initial assessment, which were scrutinized by the AO.
Application of Law to Facts: The Tribunal held that the AO's failure to act on the disclosed facts initially cannot be grounds for reopening.
Treatment of Competing Arguments: The Revenue's claim of non-disclosure was dismissed as the Tribunal found no new facts were presented.
Conclusions: The Tribunal upheld that there was full and true disclosure by the assessee, invalidating the reassessment.

Addition of Rs. 25.11 Crores

Relevant Legal Framework and Precedents: Section 68 deals with unexplained cash credits. The burden is on the assessee to prove the identity, creditworthiness, and genuineness of the transaction.
Court's Interpretation and Reasoning: The Tribunal found the assessee had discharged the burden by providing sufficient evidence of the transaction's legitimacy.
Key Evidence and Findings: The Tribunal noted the assessee's documentation and the AO's acceptance of these during the original assessment.
Application of Law to Facts: The Tribunal applied Section 68 and found no grounds for the addition as the transaction was explained.
Treatment of Competing Arguments: The Revenue's assertion of kickback was deemed speculative without supporting evidence.
Conclusions: The addition was unjustified, and the assessee's explanation was accepted.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "Section 147 does not allow the re-assessment of an income merely because of the fact that the assessing officer has a change of opinion with regard to the interpretation of law differently on the facts that were well within his knowledge even at the time of assessment."
Core Principles Established: The principles of 'reason to believe' and 'change of opinion' were reinforced, emphasizing the need for tangible new evidence for reassessment.
Final Determinations on Each Issue: The Tribunal dismissed the appeal, upholding the CIT(A)'s decision that the reassessment was void ab initio and the addition under Section 68 was unwarranted.

The Tribunal's judgment underscores the importance of adhering to procedural requirements and the limitations on the AO's powers to reassess based on previously considered facts.

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