The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) held that the Assessing Officer (AO) has initiated the re-assessment proceeding under Section 147 of Income Tax Act, 1961 in the absence of any fresh material giving rise to draw the reasons to believe that the income of the assessee has escaped assessment, and thus the proceedings initiated under Section 147 of Income Tax Act is quashed.
The assessee Telecon Consultancy Services LLP in the present case is LLP (Limited Liability Partnership) and it was subject to the assessment under Section 143(3) of Income Tax Act which was selected under Computer-Assisted Scrutiny Selection (CASS) for limited scrutiny for the under mentioned items:
I.Long-term capital gain
ii. Income from heads of income other than business/ profession mismatch
iii. Sales turnover mismatch
The assessment was framed under Section 143(3) of Income Tax Act accepting the income disclosed by the assessee in the return of income at Rs.609,55,32,180.00. According to the AO, the set off of the brought forward business loss against the income from other sources has escaped assessment, and initiated the proceedings under Section 147 of Income Tax Act by issuing notice under Section 148 of Income Tax Act.
Aggrieved by the order the assessee filed an appeal before the the Commissioner of Income Tax (Appeals) [CIT(A)], which confirmed the order of the AO. Further aggrieved the assessee filed an appeal before the Tribunal.
The Authorised Representative (AR) of the assessee Prakash D Shah, contended that the income of the assessee has escaped assessment merely on verification of the same set of documents which were available during the assessment proceedings. As such there was no fresh tangible material brought on record by the AO from the external sources suggesting that income of the assessee has escaped assessment.
The AR further stated that the reopening under Section 147 of Income Tax Act was made merely based on change of opinion after referring the documents which were available during the assessment proceedings under Section 143(3) of Income Tax Act.
The Departmental Representative (DR) Ashok Kumar Suthar, vehemently supported the order of the authorities.
The Bench comprising of Waseem Ahmed, Accountant Member and T.R Senthil Kumar, Judicial Member observed that he AO has initiated the proceedings after verification of the case records which implies that there was no fresh tangible material available on record distinct from what was available during the original assessment proceedings.
The Tribunal further noted that in the absence of any fresh material coming to the notice of the AO giving rise to draw the reasons to believe that the income of the assessee has escaped assessment.
Thus the reopening is not as per the provisions of law but based on the same set of documents which were available during the original assessment proceedings. Accordingly, the Bench quashed the proceedings initiated under Section 147 of Income Tax Act.
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