The Chennai bench of the Income Tax Appellate Tribunal (ITAT) held that as per provisions of 3rd proviso to Section 147 of the Income Tax Act, 1961, the Assessing Officer (AO) may assessee or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.
The assessment has been completed under Section 143(3) of the Income Tax Acton 30.12.2017 and determined total income of Rs. 211,66,73,558/-, by making various additions including addition towards disallowance under Section14A read with Rule 8D of Income Tax Rules, 1962 etc.
The assessee challenged the assessment order passed by the Assessing Officer before the first appellate authority and the Commissioner of Income Tax (Appeals) [CIT(A)] vide their order dated 23.07.2018 partly allowed appeal filed by the assessee.
The assessee carried the matter in appeal before the tribunal and challenged various additions made by the Assessing Officer including addition towards disallowance under Section14A read with Rule 8D of Income Tax Rules.
The ITAT, Chennai Benche, vide order dated 31.03.2021 in ITA No. 2803/Chny/2018, set aside the issue of disallowance under Section 14A read with Rule 8D of Income Tax Rulesto the file of the Assessing Officer, in light of arguments of the assessee and to decide the issue in accordance with law.
The case was subsequently re-opened under Section147 of the Income Tax Act for the reasons recorded, as per which income chargeable to tax had been escaped assessment on account of computation of disallowance under Section 14A read with Rule 8D of Income Tax Rules. Therefore, the notice under Section 148, dated 24.03.2020 was issued and served on the assessee.
In response, the assessee neither filed any return of income nor submitted details in respect of computation of disallowance under section. 14A of the Act. Therefore, the Assessing Officer passed ex-parte assessment order under section. 144 read with Section 147 of the Income tax Act on 21.09.2021 and assessed total income at Rs. 211,66,73,558/-, without there being any addition towards disallowance under Section 14A read with Rules 8D of Income Tax Rules.
The assessee carried the matter in appeal before the first appellate authority and the CIT(A), NFAC, Delhi, vide order dated 22.12.2022, partly allowed appeal filed by the assessee. Aggrieved by the CIT(A) order, the assessee appealed before the tribunal.
The tribunal after hearing both the parties noted that as per provisions of 3rd proviso to section 147 of the Income Tax Act, the Assessing Officer may assessee or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. In other words, there is no scope for re-opening of assessment on any issue which is subject matter of any appeal before the appellate authority.
It was observed that the assessment has been reopened to assess income chargeable to tax had been escaped assessment on account of computation of disallowance under Section14A read with Rules 8D of Income Tax Rules and said issue was subject matter of appeal before the CIT(A).
Further, the issue of disallowance under Section 14A read with Rules 8D of Income Tax Ruleswas travelled up to Tribunal and Tribunal vide order dated 31.03.2021has remanded the issue back to the file of the Assessing Officer for de-novo consideration of disallowance under Section14A read with Rules 8D of Income Tax Rules.
The two bench members consisting of V. Durga Rao (Judicial member) and Majunatha G (Accountant member) held that it is very clear that the issue on which the assessment has been re-opened was subject matter of appeal and thus, in the bench’s view as per 3rd proviso to Section 147 of the Income Tax Act, re-opening of assessment and consequent assessment order passed by the Assessing Officer was bad in law and liable to be quashed. Thus, the bench quashed the reassessment order passed by the Assessing Officer under section. 144 read with Section 147 of the Income Tax Act dated 21.09.2021. And the appeal was allowed
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