Tribunal quashes notice & reassessment order, upholds deletion under Section 68, dismisses Revenue's appeals.

The Tribunal quashed the notice issued under Section 148 and the reassessment order, holding them to be without jurisdiction. Additionally, the Tribunal upheld the deletion of the addition of Rs. 1.50 crores made under Section 68, finding that the A.O. did not comply with the Tribunal's directions and framed the assessment without any incriminating material found at the time of search. The appeals by the Revenue were dismissed.

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Issues Involved:
1. Deletion of the addition of Rs. 35 lacs made by the A.O. u/s. 68 of the Act.
2. Challenge to the reopening of the assessment by the issue of notice u/s. 148 of the Act.
3. Deletion of the addition of Rs. 1.50 crores made u/s. 68 of the Act.
4. Compliance with specific directions issued by the ITAT.

Issue-wise Detailed Analysis:

1. Deletion of the addition of Rs. 35 lacs made by the A.O. u/s. 68 of the Act:
The Revenue's grievance relates to the deletion of the addition of Rs. 35 lacs made by the Assessing Officer (A.O.) under Section 68 of the Income Tax Act. The Tribunal observed that the A.O. had reasons to believe that the income chargeable to tax had escaped assessment based on accommodation entries that were not found in the assessee’s books of account. However, the Tribunal noted that the notice under Section 148 was issued beyond the four-year period from the end of the relevant assessment year. The Tribunal emphasized that the proviso to Section 147 requires that the income must have escaped assessment due to the failure of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal found no such allegation in the reasons recorded for reopening the assessment and thus held the notice under Section 148 to be without jurisdiction.

2. Challenge to the reopening of the assessment by the issue of notice u/s. 148 of the Act:
The assessee challenged the reopening of the assessment on the grounds that the notice under Section 148 was issued beyond the permissible four-year period. The Tribunal referred to several judicial decisions, including the case of Haryana Acrylic Manufacturing Company and Dulichand Singhania, which held that the absence of an allegation of failure to disclose fully and truly all material facts necessary for the assessment makes the action under Section 147 beyond the four-year period without jurisdiction. The Tribunal concluded that the notice issued under Section 148 was invalid as it did not meet the necessary conditions stipulated in the proviso to Section 147.

3. Deletion of the addition of Rs. 1.50 crores made u/s. 68 of the Act:
In the second round of litigation, the Revenue appealed against the deletion of the addition of Rs. 1.50 crores made under Section 68 of the Act. The Tribunal noted that the First Appellate Authority had held that the A.O. relied on the statement of Shri Neeraj Jain without affording the assessee an opportunity for cross-examination. The Tribunal emphasized that the A.O. did not conduct the enquiry prescribed by the Tribunal and relied on material partly on evidence and partly on suspicion. The Tribunal upheld the decision of the First Appellate Authority, which deleted the addition made by the A.O.

4. Compliance with specific directions issued by the ITAT:
The Revenue contended that the A.O. complied with the Tribunal’s directions by issuing notices to Shri Neeraj Jain, which returned unserved. The Tribunal, however, noted that the assessment was framed under Section 153A/143(3) without any incriminating material found at the time of search. The Tribunal referred to the decision of the Hon’ble High Court of Delhi in the case of Kabul Chawla, which held that no assessment under Section 153A can be framed in the absence of any incriminating material found at the time of search. The Tribunal concluded that the assessment order was invalid and quashed it, rendering the Revenue’s appeal a nullity.

Conclusion:
The Tribunal quashed the notice issued under Section 148 and the reassessment order, holding them to be without jurisdiction. The Tribunal also upheld the deletion of the addition of Rs. 1.50 crores made under Section 68, finding that the A.O. did not comply with the Tribunal’s directions and framed the assessment without any incriminating material found at the time of search. The appeals by the Revenue were dismissed.

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