The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has recently, in an appeal filed before it, held that bringing evidence on what basis income has escaped and re-opening of assessment is required, is a procedural requirement to invoke section 147/148.
The aforesaid observation was made by the Mumbai ITAT, when an appeal was preferred before it by the assessee Ramchandra Dashrath & Co., as against the order dated 29.03.2011, passed by the CIT(A), Mumbai ,for the assessment year 2002-03.
The principle grounds of the assessee’s appeal being the question as to whether on the facts and circumstances of the case and in law, the Commissioner of Income-tax (Appeals) [CIT(A)] , has erred in upholding the validity of the order passed u/s. 143(3) read with section 147 of the Income Tax Act, 1961, and as to whether the CIT(A) has failed to appreciate that the appellant did not receive any notice u/s. 148 of the Income Tax Act, 1961, and further that the objection in this regard from the appellant remained undisposed of by the AO, the brief facts of the case were that assessee was a partnership firm engaged as fruit merchant and commission agent for fruits in the APMC market.
Being engaged in trading activities also which were not reflected in the financial statement and in the income tax records, a return declaring the total income of ₹21,578/- was filed on 12.012.2002, with notices u/s 143(2) and 142(1) issued and served upon the assessee. Subsequently, a questionnaire was sent to the assessee on 04.10.2014 followed by a search action carried out u/s 132 of the Income Tax Act in the name of Ramchandra Dashrath & Co. of 2002-03, wherein it was discovered that the assessee-firm was also operating from the same premises as that of the search person.
Following the same, the original assessment order was passed u/s 143(3) on 22.09.2005, determining the total income of ₹1,62,60,859/-, by the ACIT, Central Circle, Mumbai, who was not the Assessing Officer of the assessee’s firm , against which objection was taken by the assessee at the relevant time but not decided by the Revenue authorities. And being aggrieved by the said assessment order, the assessee-firm filed a appeal before the CIT(A), who vide his order dated 19.05.2008, annulled the said assessment order as the same was passed by ACIT, Central Circle, Mumbai ,who did not have jurisdiction.
The Assessing Officer gave effect to the order of the CIT(A) on 02.07.2008, and thereafter, a notice u/s 148, dated 25.03.2009 , was issued by the Dy. CIT ,Mumbai ,who was the Assessing Officer of the assessee. And the assessment order was passed on 30.12.2009, thereby making an addition of ₹46,56,323/- as unexplained cash credits of ₹87,46,462/- towards the difference between the balance in sundry creditors and sundry debtors, ₹22,96,896/- towards unexplained investments, and ₹5,44,600/- towards income from business operation, thus, assessing the total income at ₹1,64,44,860/-.
Being aggrieved by this assessment order dated 30.12.2009, the assessee had filed an appeal before the CIT(A0, who partly allowed the appeal of the assessee. And it is the same because of which the assessee has preferred the instant appeal before the Mumbai ITAT.
With Ms. Aasifa Khan, the AR for the assessee submitting that it is clear from the reasons that the Assessing Officer has reopened the assessment only on the ground that although the scrutiny assessment u/s 143(3) was annulled by the CIT(A), however, the quantification of the income is not held to be erroneous. He further submitted that once the order is annulled, the same becomes non-est and no longer a valid order, and hence that the Assessing Officer, for reopening the assessment, cannot rely on the same.
The AR further submitted that the reasons recorded for reopening are not based on any search conducted at assessee’s premises as there was no search in the assessee’s case, and that the reasons recorded are not at all in consonance with the additions made by the Assessing Officer vide order dated 30.12.2009. Therefore, he submitted that on the threshold itself ,the assessment itself is a bad in law and void ab initio.
On the other hand, Mr. Sunil Kumar Jha, the CIT-DR, on behalf of the Revenue submitted that the Assessing Officer has rightly reopened after giving the cogent reasons for reopening and therefore, that the question of annulment of earlier assessment does not comes in the way of reopening. He relied upon the assessment order u/s 147 r.w.s. 143(3) as well as the order of the Ld. CIT(A).
Hearing the opposing contentions of either sides and perusing the materials available on record, the ITAT Bench comprising of Pramod Kumar, the Vice- President , and Suchitra Kamble, the Judicial Member observed :
“On this issue, the assessee’s contentions are accepted as no cogent reason was given while reopening. Section 147 has given a proper mechanism while reopening the cases by giving a convincing reason so that the assessee can present its case before the Revenue authorities in a clear manner and there is no room for escapement to the assessee when the tax issues are contested. Thus the reopening on this issue is not as per the procedural aspect prescribed by the Income Tax Act. ”
Finally, allowing the assessee’s appeal, the Mumbai ITAT concluded:
“The assessment itself become bad in law and therefore does not survive. The appeal of the assessee is allowed on the legal issue and therefore there is no need to comment on the merit of the case”.
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