The Delhi Bench of Income Tax Appellate Tribunal(ITAT) quashed the assessment, holding that the re-opening of the assessment under Section 147 of Income Tax Act,1961 was illegal.The Tribunal’s decision followed the precedent set in Super Spinning Mills Ltd. vs Addl. CIT, where it was established that re-opening is unjustified if the original return has not been processed.
Rajesh Kumar,the appellant-assessee,had filed return of income (ROI) under section 139(1) of the act, declaring INR 1,11,12,390. The Assessing Officer(AO) re-opened the assessment under Section 147 after a survey on 30.11.2018, and issued a notice under Section 148 on 28.03.2019.
A revised return declaring INR 1,06,67,440 was filed by the assessee on 20.08.2019.
The AO issued further notices under Sections 143(2) and 142(1). The assessee’s objections to the re-opening were addressed in an order dated 14.11.2019. After considering various records and submissions of the assessee, the AO made several additions and computed the total income at INR 22,21,82,510.
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The assessee, dissatisfied with the assessment, appealed to the Commissioner of Income Tax(Appeals)[CIT(A)], which was partly allowed. While the objection to the re-opening of the assessment was rejected, the CIT(A) reduced the addition from INR 9,11,85,602 to INR 1,55,10,214. Additionally, the CIT(A) deleted the additions of INR 1,03,80,925, INR 3,40,55,423, and other disallowances under sections 40(a)(ia) and 43B of the Act.
The grounds raised by the assessee were, firstly, whether the CIT(A) was justified in upholding the AO’s initiation of proceedings under Section 147 of the Act, despite the original return filed under Section 139(1) not being processed.
Secondly, whether the CIT(A) was correct in rejecting the books of account and estimating the income at 8% of gross receipts, despite the assessee maintaining proper books during the assessment.
During the hearing, the assessee counsel argued that the AO’s re-opening of proceedings was illegal, as the original return had not been processed. The appeal was focused on this ground alone and Ground No. 1 was taken up for adjudication.
The Tribunal after hearing both the sides considered whether the AO’s re-opening of the assessment was justified under the circumstances. It was noted that the original return under Section 139(1) had not been processed, and no assessment under Section 143(3) had been completed.
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The appellate bench noted that the AO argued that Section 147 can be invoked if the AO believes income has escaped assessment and also the CIT(A) cited Explanation 2 to Section 147, which allows invoking the section even if no assessment has been made.
The two-member bench comprising Kul Bharat(Judicial Member) and Avdhesh Mishra( Accountant Member) noted that the assessee counsel had cited a similar dispute in Super Spinning Mills Ltd. vs Addl. CIT 37 DTR (Chennai) (T.M) (Trib)decided by the Hon’ble Third Member in favor of the assessee which held that the AO’s re-opening of the assessment was illegal and unjustified.
Based on the above precedent the tribunal quashed the impugned assessment and allowed the grounds raised by the assessee.
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