Reopening of Assessment u/s 147: ITAT upholds CIT(A) Decision, Finds Reassessment Beyond Jurisdiction [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal(ITAT)  upheld the Commissioner of Income Tax(Appeals)[CIT(A)] decision in deleting the additions made under section 68 of Income Tax Act,1961, concluding that the reassessment under section 147 was based on a mere change of opinion and was beyond jurisdiction.

The Revenue-appellant, appealed against the order dated  27.07.2017 for the assessment year 2007-08 passed by CIT(A).In this case, Nova Formworks Private Ltd,respondent-assessee, was assessed in 2009 with a total income of Rs. 43,134/-. Later, the Assessing Officer(AO) learned that the assessee received Rs. 15 lakhs in accommodation entries from MARRASS, a company controlled by Shyam Shankar Gupta.

The AO initiated reassessment proceedings under section 147 and issued a notice under section 148. The assessee responded in April 2014, asking for the original 2007 return to be considered. The AO issued further notices and the assessee provided documents related to the capital received.

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The AO found that the assessee issued 2,71,000 shares at Rs. 10 each, with a premium of Rs. 90. Notices to investors were returned or went unanswered. The AR was unable to produce the directors of the investor companies. As the assessee failed to provide necessary confirmations, the AO added the amount to the total income under section 68 of the Act.

The assessee appealed to the CIT(A), challenging the assessment order. The assessee stated that Rs. 45 lakhs was received in the previous year (AY 2006-07) and the rest in the current year (AY 2007-08). The CIT(A) found that the assessee had provided all necessary documents during the original assessment.

He noted that the AO had no evidence to prove that the Rs. 15 lakhs from MARRASS was an accommodation entry or that the other amounts were bogus. Since the reassessment was done after four years and the assessee had disclosed all material facts, the CIT(A) deleted the addition under section 68 of the Act.

Aggrieved by the decision of the CIT(A),the revenue appealed before the tribunal.

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The two member bench comprising Sudhir Kumar(Judicial Member) and S.Rifaur Rahman(Accountant Member) reviewed the submissions and the material on record. It noted that the original assessment under section 143(3) was completed on 16.11.2009, and the AO had verified the issue based on the information provided by the assessee. However, the assessment order did not discuss this issue.

The AO later reopened the assessment after receiving information about the Rs. 15 lakhs accommodation entry from MARRASS, but the reasons for reopening did not mention any failure by the assessee.

Since the original assessment was already completed, and the transaction was verified and accepted, the tribunal concluded that the reopening was a change of opinion and beyond jurisdiction. Therefore, it agreed with the findings of the CIT(A) and saw no reason to disturb them.

In short,the appeal filed by the revenue was dismissed.

To Read the full text of the Order CLICK HERE

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