2017 (9) TMI 1988 - AT - Income Tax

Assessment Reopening Unlawful Due to Lack of Specific Direction from ITAT

The Tribunal held that the reopening of the assessment for the year 2005-2006 was unlawful as the ITAT did not provide a specific direction to tax the ... Reopening of assessment u/s 147 - Period of limitation - Applicability of provisions of section 150(1) - HELD THAT:- As in the order passed by the ITAT for the AYs 2001-02 to 2004-05 [2017 (2) TMI 854 - ITAT HYDERABAD] the Tribunal decided the matter by holding that section 150(1) of the Act can be invoked only when there is a direction to bring the balance of interest to tax in the earlier assessment years whereas there is no such direction in the order passed by the ITAT for the A.Y. 2006-07. It deserves to be noticed that section 150(1) refers to “finding or direction”. The Division Bench of the ITAT, while disposing of the appeal for the AYs 2001-02 to 2004-05, appears to have been of the view that in the absence of any specific direction section 150(1) cannot be invoked, probably by assuming that there is no difference between the expression “finding and direction”. Since this is an order passed by the Division Bench and that too in the assessee’s own case in the earlier years, respectfully follow the same to hold that the provisions of section 150(1) were wrongly invoked by the Assessing Officer. Under these circumstances, the reopening of the assessment is treated as bad in law and the assessment is hereby set aside. Appeal filed by the assessee is allowed. Issues:Reopening of assessment u/s 147 read with 150(1) based on ITAT order, Validity of reopening assessment, Interpretation of ITAT order regarding taxation of interest, Limitation period for issuing notice u/s 148.Analysis:1. The appeal challenged the order by Ld. CIT(A)-12, Hyderabad for the assessment year 2005-2006, focusing on the reopening of assessment u/s 147 read with 150(1) based on the ITAT order. The assessee, a civil contractor, declared taxable and agricultural income for the year. The assessment was reopened due to unassessed interest income, following a previous ITAT direction in the A.Y. 2006-07 regarding taxing 1/6th of interest income. The AO reopened the assessment for the year under consideration, bringing to tax a portion of interest accrued during that year.2. The assessee objected to the reopening, arguing that the ITAT's direction in the A.Y. 2006-07 was specific to that year only and did not extend to the preceding years. The AO, however, relied on the ITAT's finding that the balance of interest was assessable in the earlier years as per section 150(1) of the Act. The Ld. CIT(A) upheld the AO's action, leading the assessee to appeal before the Tribunal.3. During the hearing, the assessee's counsel highlighted a similar issue in the assessee's case for A.Ys 2001-02 to 2004-05, where the ITAT held that without a specific direction, the AO cannot reopen earlier years' assessments under section 150(1). The counsel argued that the reopening for A.Y. 2005-06 was unjustified as the ITAT did not provide a direction for the earlier years. The counsel emphasized the limitation period for issuing notice u/s 148 had also expired for the relevant assessment years.4. The Tribunal analyzed the ITAT's orders for A.Ys 2001-02 to 2004-05 and A.Y. 2006-07, noting that section 150(1) can be invoked only with a specific direction to tax the balance of interest in earlier years. As the ITAT did not provide such a direction for A.Y. 2006-07, the Tribunal held that the AO wrongly invoked section 150(1) for A.Y. 2005-06. Consequently, the reopening of the assessment was deemed unlawful, and the assessment was set aside, allowing the appeal filed by the assessee.