Hyderabad bench of Income Tax Appellate Tribunal held that if the AO was satisfied with the original assessment then the re-assessment order under section 147/ 148 of the Income Tax Act passed only on the direction of the superior officers is invalid.
The assessee in the instant case being an individual engaged in the business of generation and distribution of power. During the assessment year the assessee filed its return and declared its total income as nil after claiming deduction under Section 80IA of the Income Tax Act.
The AO has issued notice u/s 148 of the act for re-opening the assessment for the reason that the income assessable to tax has escaped assessment by incorrect allowance of deduction u/s 80IA only on the advice of the Assistant Commissioner of Income Tax (ACIT). Accordingly the said income has treated under the head of ‘income from other sources’. CIT (A) has allowed the various grounds of appeal raised by the assessee including the ground of addition of the aforesaid amount in order to deny the assessee’s claim of deduction u/s 80IA.
The revenue filed an appeal before the bench against the order pronounced by the CIT (A). Revenue contented that the aforesaid amount of the interest income received by the assessee was not derived from business but is to be treated as income from other sources instead of income from business.
The bench comprising of Judicial Member P.Madavi Devi and Accountant Member S.Rifaur Rahman has observed that in the light of the material facts it is clear that the re-assessment was made by the AO only on the directions of the ACIT and the AO was totally satisfied with the original assessment he made earlier and the assessee has merit in its claim as per the return of income. The bench also found that AO has not applied his mind independently to initiate the proceedings u/s 147 and not recorded the satisfaction before initiating the proceedings.
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