The Delhi bench of Income Tax Appellate Tribunal (ITAT) has quashed a time barred reassessment notice issued under Section 148 of Income Tax Act 1961 based on information from investigation wing regarding bogus expenses.
The assessee Humboldt Wedag India Pvt. Ltd. is company is mainly engaged in the business of designing, fabricating, manufacturing and supply of equipment plants and machinery for cement manufacturing companies.
After considering the original return, the AO issued notice under Section 148 of the Income Tax Act for initiating reassessment proceedings. Therefore, the reassessment order passed under section 147 of the Income Tax Act.
Aggrieved by the reassessment order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)[CIT(A)].
Before the Commissioner of Income Tax (Appeals), the assessee challenged the jurisdiction assumed by the Assessing Officer under the Section 147 read with Section 148 of the Income Tax Act. Also claimed that a reopening notice was issued for reopening assessment without meeting the prerequisites of Section 147 to Section 151 of the Income Tax Act.
The Commissioner of Income Tax (Appeals) dismissed the ground in relation to the lack of jurisdiction under Section 147 of the Income Tax Act but granted partial relief on merits. Further aggrieved by the Commissioner of Income Tax (Appeals) order, the assessee and revenue filed appeal before the tribunal.
S.K. Aggarwal, Counsel for the assessee submitted that the Assessing Officer has wrongly usurped jurisdiction under Section 147 of the Income Tax Act. Further claimed that the reopening has been issued beyond four years from the end of the Assessment Year 2006-07 in question and the assessment in this case was earlier completed under Section 143(3) of the Income Tax Act.
Further, the allegations of bogus consultancy fees made against the assessee are without any corroboration and have been made overlooking the relevant facts.
T. James Singson, the counsel for the revenue supported the disallowance towards bogus consultancy fees claimed through an accommodation entry of Rs.69,08,000 and decision of the lower authorities.
The tribunal while considering the appeal observed the reasons for recording under Section 148(2) of the Income Tax Act that is on the information of the Kolkata Investigation Wing that that the assessee has booked bogus expenses amounting to Rs.69,08,000/- from entry operator companies run by Sri Praveen Agarwal.
Moreover, the notice under Section 148 was issued after expiry of four years from the end of the relevant assessment year.
Therefore, the two-member bench of Chandra Mohan Garg (Judicial Member) and Pradip Kumar Kedia (Accountant Member) find that the income chargeable to tax has escaped assessment ‘by reason of the failure on the part of the assessee to disclose fully and truly all material facts’ necessary for assessment. In the absence of such allegation, the jurisdiction assumed under Section 148 Income Tax Act to reopen a completed assessment is clearly void ab initio.
Thus, the issuance of notice under Section 147/148 Income Tax Act is time barred and void ab initio. Further, the reassessment order framed was without jurisdiction and is illegal. Therefore, the bench allowed the appeal filed by the assessee.
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