2025 (3) TMI 999 - AT - Income Tax

Reopening of assessment u/s 147 - Addition u/s 68 - reopening notice beyond more than four years - HELD THAT - The assessee has furnished clinching evidences before the AO during the course of the original assessment proceedings to prove the transactions. Therefore by no stretch of imagination it can be said that the assessee failed to disclose truly and fully all material necessary for its assessment for the year under consideration. No hesitation in setting aside the impugned notice u/s 148 thereby quashing the resultant assessment order. We would now address to the merits of the case. As mentioned elsewhere the assessee has furnished all the documentary evidence thereby establishing the identity creditworthiness and genuineness of the transactions and discharging completely the initial onus cash upon it by the provisions of Section 68 of the Act. The assessment orders of the two companies M/s. Tremendous Mining Minerals Pvt. Ltd and M/s. Sur Buildon Private Limited are also discussed hereinabove by which the impugned transactions have been accepted in the respective cases. Therefore the same transactions cannot be treated as bogus and colourable in the hands of the assessee. Even on the merits of the case the additions do not stand and therefore we direct the AO to delete the impugned additions. Appeal of the assessee is allowed.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

1. The legality of the reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961, and whether the notice issued under this section was valid.

2. The justification of the addition of Rs. 80,00,00,000/- as unexplained cash credit under Section 68 of the Act.

3. The procedural adherence to departmental instructions, particularly concerning e-proceedings, in the reassessment process.

ISSUE-WISE DETAILED ANALYSIS

1. Legality of Reassessment Proceedings under Section 148:

Relevant Legal Framework and Precedents: The reassessment proceedings are governed by Sections 147 and 148 of the Income Tax Act, which allow the Assessing Officer (AO) to reassess income if there is a reason to believe that income has escaped assessment. The first proviso to Section 147 stipulates that no action can be taken after four years unless there is a failure on the part of the assessee to disclose fully and truly all material facts.

Court's Interpretation and Reasoning: The Tribunal noted that the AO's reasons for reopening the assessment did not specify which material facts were not disclosed by the assessee. The Tribunal emphasized that the original assessment proceedings had already examined the relevant transactions, and the assessee had provided comprehensive documentation.

Key Evidence and Findings: The Tribunal reviewed the documentary evidence, including confirmations, bank statements, and income tax returns, which the assessee had submitted during the original assessment. The Tribunal found no failure on the part of the assessee to disclose material facts.

Application of Law to Facts: The Tribunal applied the proviso to Section 147, noting that since the reopening was beyond four years, the absence of any failure to disclose material facts meant that the jurisdictional requirement for reassessment was not met.

Treatment of Competing Arguments: The Tribunal considered the AO's assertion of nondisclosure but found it unsupported by evidence, particularly given the detailed documentation provided by the assessee during the initial assessment.

Conclusions: The Tribunal concluded that the reassessment notice under Section 148 was invalid, and the resultant assessment order was quashed.

2. Addition of Rs. 80,00,00,000/- as Unexplained Cash Credit under Section 68:

Relevant Legal Framework and Precedents: Section 68 of the Income Tax Act addresses unexplained cash credits, placing the onus on the assessee to prove the identity, creditworthiness, and genuineness of the transactions.

Court's Interpretation and Reasoning: The Tribunal found that the assessee had provided sufficient evidence to establish the identity, creditworthiness, and genuineness of the transactions with M/s Sur Buildcon Pvt Ltd and M/s Tremendous Mining & Minerals Pvt Ltd.

Key Evidence and Findings: The Tribunal reviewed the confirmations, bank statements, and income tax returns of the involved companies, which had been accepted in their respective assessments.

Application of Law to Facts: The Tribunal determined that the assessee had discharged its burden under Section 68, and the same transactions could not be treated as unexplained cash credits in the assessee's hands.

Treatment of Competing Arguments: The Tribunal rejected the Revenue's argument that the transactions were bogus, noting that they had been accepted in the assessments of the involved companies.

Conclusions: The Tribunal directed the AO to delete the addition of Rs. 80,00,00,000/- as unexplained cash credits.

3. Procedural Adherence to Departmental Instructions:

Relevant Legal Framework and Precedents: The Tribunal considered the procedural requirements for conducting reassessment proceedings, particularly in light of departmental instructions on e-proceedings.

Court's Interpretation and Reasoning: The Tribunal did not find it necessary to delve deeply into procedural adherence, given its findings on the substantive issues.

Key Evidence and Findings: The procedural aspects were not the primary focus, as the Tribunal's decision was based on the substantive legal grounds.

Application of Law to Facts: The Tribunal's decision did not hinge on procedural compliance, as the reassessment was quashed on substantive legal grounds.

Treatment of Competing Arguments: Procedural arguments were not central to the Tribunal's decision, given the substantive findings.

Conclusions: The Tribunal's decision did not rest on procedural compliance, focusing instead on the substantive legal issues.

SIGNIFICANT HOLDINGS

The Tribunal's significant holdings include:

- The reassessment notice under Section 148 was invalid due to the absence of nondisclosure of material facts by the assessee, as required by the first proviso to Section 147 for reopening beyond four years.

- The addition of Rs. 80,00,00,000/- as unexplained cash credit under Section 68 was unjustified, as the assessee had provided sufficient evidence to establish the identity, creditworthiness, and genuineness of the transactions.

- The Tribunal emphasized the importance of adhering to the jurisdictional requirements for reassessment, particularly the necessity of demonstrating nondisclosure of material facts when reopening beyond four years.

The Tribunal's final determination was to allow the appeal of the assessee, quashing the reassessment proceedings and directing the deletion of the additions made under Section 68.

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