Assessment quashed without granting Liberty of Reopening to AO: ITAT rectifies order as per SC Judgement [Read Order]

The Chandigarh Bench of the Income TaxAppellate Tribunal (ITAT) ruled that failing to provide the Assessing Officer (AO) liberty to initiate reassessment proceedings, as held by the Supreme Courtin the Abhisar Buildwell case, constituted a rectifiable error.

The Revenue filed Miscellaneous Applications against an ITAT order dated November 4, 2024, which had dismissed various appeals filed by the Revenue in the cases of M/s Oswal Apparels Pvt. Ltd. and related entities for Assessment Years 2009-10 and 2010-11.

The original tribunal order had relied on the Supreme Court's landmark judgment in PCIT vs. Abhisar Buildwell Private Limited to dismiss the Revenue's appeals. The primary issue in those cases was whether additions could be made in search assessments under Section 153A in the absence of incriminating material for completed or unabated assessment years.

The Revenue contended that while the ITAT correctly applied the part of the Abhisar Buildwell judgment that prohibits additions without incriminating material, it failed to incorporate the "savings clause" found in the same judgment.

The Supreme Court explicitly stated that even if a search assessment was quashed due to a lack of incriminating material, the AO's power to reopen such assessments under Sections 147/148 was preserved.

The revenue argued that by not granting this liberty, the tribunal's order contained an error apparent from the record.

The assessee argued that since the AO had already passed "order giving effect" (OGE) to the tribunal's original decision, no fresh directions could be issued. The assessee also relied on a Delhi High Court ruling in Good Earth Plotted Development Private Limited, which discussed the strict time limits for such reassessments.

The two-member bench, comprising Laliet Kumar(Judicial Member) and Krinwant Sahay (Accountant Member) observed that the Supreme Court in Abhisar Buildwell concluded that in the absence of incriminating material, the AO cannot reassess completed assessments but these assessments can be reopened under Sections 147 or 148 of the Income Tax Act.

The tribunal admitted that while dismissing the Revenue's appeals, it had "inadvertently" omitted to mention this specific liberty. It clarified that any such reopening must still fulfill all legal conditions, including the period of limitation.

The bench concluded that the original orders required modification to comply with the Supreme Court's mandate. It allowed the Revenue's applications and added a new paragraph (8A) to the previous decisions, by formally granting the saved liberty to the Assessing Officer. The Miscellaneous Applications of the Revenue were allowed.

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