The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) invalidated the reopening of an assessment under Section 147 of the Income Tax Act,1961, concluding that the Assessing Officer (AO) relied on incorrect facts.
Team Global Logistics Pvt. Ltd.,the appellant-assessee,provided freight forwarding services as a Multimodal Transport Operator (MTO) and software development services. It submitted its return for AY 2012-13, reporting an income of ₹6,68,55,810, which the Assessing Officer(AO)accepted under Section 143(3) on February 18, 2015.
Later, the AO received information about a ₹35,00,000 transaction with M/s Tribhuvan Dealtrade Pvt. Ltd., a company identified as providing accommodation entries. The case was reopened under Section 147, and a notice was issued on March 22, 2019.
The assessee filed a return on April 25, 2019, but its objections to the reopening were rejected on June 14, 2019. The AO requested details of transactions with TDPL through notices under Sections 143(2) and 142(1).
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Despite confirming the loan and stating that interest was paid with tax deducted at source TDS deducted, the AO disallowed the ₹35,00,000 loan as unexplained cash credit under Section 68 and added ₹2,81,688 as interest. The appeal filed by the assessee with the Commissioner of Income Tax (Appeals) [CIT(A)] was dismissed.
Aggrieved by the CIT(A) order the assessee appealed before the tribunal.
The tribunal observed that the Supreme Court in Civil Appeal No. 8629 of 2024, Union of India and Others v. Rajeev Bansal, outlined the procedures for reopening assessments under the old regime. Section 147 allows reassessment if the assessing officer has ‘reasons to believe’ that income has escaped assessment, with the notice under Section 148 needing to comply with the time limits in Section 149.
The officer must obtain sanction under Section 151 and provide an opportunity for a hearing, as established in GKN Driveshafts (India) Ltd. v. Income Tax Officer. The tribunal emphasized that the current appeal follows the old regime, requiring tangible material to support the belief of income escapement.
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The Bombay High Court, in Writ Petition No. 3638 of 2021, Parinee Realty Pvt. Ltd. v. Assistant Commissioner of Income Tax, held that reopening assessments within four years requires tangible material and cannot be based on mere change of opinion. The court found that the assessing officer’s reasons relied on information available before the original assessment order, indicating no new evidence to justify reopening.
It concluded that the issue of loans given at low or no interest rates had already been addressed in the original assessment. The court emphasized that a belief that interest income should have been charged, despite not being received, did not provide grounds for reopening the assessment. Ultimately, it ruled that the assessing officer could not reopen the case based on the same material already considered.
The tribunal noted that the learned assessing officer incorrectly claimed that the original return of income had not been scrutinized. It highlighted that a scrutiny assessment had already taken place, with an order passed under Section 143(3) on February 18, 2015, accepting the declared income of ₹6,68,55,810.
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The tribunal pointed out that the assessing officer had previously issued a notice under Section 142(1) on September 1, 2014, requesting details about unsecured loans, which the assessee had provided.
The two member bench comprising Sunil Kumar(Judicial Member) and BR Baskaran(Accountant Member), concluded that the reopening was based on incorrect facts, rendering the reasons for reopening invalid and resulting in the appeal being allowed while quashing the reassessment without addressing the remaining issues on merit.
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