CIT(A) cannot Direct Reopening u/s 150(1) if Time Limit beyond 6 years u/s 150(2) has Expired: ITAT [Read Order]

The Surat Bench of the Income Tax Appellate Tribunal ( ITAT ) held that CIT ( A ) could not be reopened under Section 150 of the Income Tax Act due to the expiry of the time limit of 6 years stated under Section 149 of the Income Tax act, 1961.

Lexus Softmac ( assessee ) engaged in the business of diamond processing machinery, filed an income tax return for the Assessment Year ( AY ) 2012-2013 on 22.09.2012 declaring a total income of Rs. 3,41,63,640.

Kamal J. Zaveri engaged in providing all types of bogus bills, which was found from a survey action under section 133A of the Income Tax Act, 1961, on 24.03.2015. The Income authorities found that Zaveri received cheques from various parties, and the amount was returned to the parties after deducting his commission.

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The Assessing Officer ( AO ) found that Kamal J Zaveri's group provided accommodation entries of Rs. 24,60,439 to the assessee. Therefore, the AO reopened the case and issued a notice under section 148 of the Income Tax Act. The assessee filed an income tax return for AY 2012-2013 on 24.04.2019.

The AO added Rs. 24,72,741, including a commission of Rs. 12,302, under section 69C of the Income Tax Act. Aggrieved by the order, the assessee filed an appeal before the Commissioner of Tax ( appeals ) [ CIT ( A ) ].

The CIT ( A ) held that the bogus purchase was made in 2011 and directed AO to tax these amounts in AY 2011-2012 as per provisions of the Income Tax Act. Aggrieved by the CIT ( A )s’ order, the assessee filed an appeal before ITAT.

The counsel for the assessee argued that the CIT ( A ) erred in law by directing the AO to reopen the assessment by invoking section 150 of the Income Tax Act. The counsel also submitted that the time limit is only six years for reopening an assessment under section 150 read with section 149 of the Income Tax Act.

On the other hand, the counsel for the revenue relied on the decisions of the lower authorities and submitted that to dismiss the appeal. 

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The two-member bench comprising Pawan Singh ( Judicial Member ) and Bijayananda Pruseth (Accountant Member) accepted the argument of the counsel for the assessee. The tribunal observed that Section 150(2) of the Income Tax Act explicitly stated the time limit for reopening an assessment under Section 150(1) of the Income Tax Act.

The tribunal examined the time limit in light of provisions of the Income Tax Act and noted that a present appeal was filed for the AY 2011-2012. The time limit for reopening the assessment had expired beyond the permissible six-year period, which ended on 31.03.2018. Since the Assessing Officer (AO) passed the order on 28.11.2019, the tribunal quashed the order issued by the CIT(A) and allowed the appeal.

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