2019 (3) TMI 1249 - AT - Income Tax

Tribunal remands case for fresh determination, emphasizing detailed order. Procedural victory for appellant

Smt. Vinita Devi Bagrodia Versus DCIT, Circle-2 (1), Ujjain

The Tribunal set aside the CIT(A)'s decision and remanded the case for a fresh determination, emphasizing the need for a detailed and reasoned order. The ... Reopening of assessment u/s 147 - assessment proceedings u/s 143(3) concluded - disallowance u/s 14A r.w.r 8D - HELD THAT:- The order is ex-facie non-speaking. The Ld. CIT(A) has not considered the objection of the assessee. During the course of hearing, Ld. Counsel for the assessee has taken additional ground against the reopening of the assessment. - matter restored before the CIT(A). Issues:1. Validity of reopening assessment under sections 147 and 148 of the Income Tax Act.2. Addition of Rs. 40,46,763 under section 14A of the Income Tax Act.3. Whether the dividend income is incidental to the main trading activity.4. Approval process for reopening assessment.5. Justifiability of the actions taken by the Assessing Officer and CIT(A).Issue 1: Validity of reopening assessment under sections 147 and 148 of the Income Tax Act:The appellant contested the validity of the assessment reopening, arguing that all relevant facts were disclosed during the initial assessment under section 143(3). The appellant emphasized that there was no failure on their part to disclose material facts, as required for a valid reopening. The appellant cited legal precedents to support their position, asserting that the absence of a finding of failure to disclose by the Assessing Officer rendered the reopening invalid. The appellant also claimed that the reopening was based on a change of opinion and not new information, as all details were already available in the records. The appellant further argued that the lack of independent approval by the Commissioner of Income Tax (CIT) tainted the reopening process.Issue 2: Addition of Rs. 40,46,763 under section 14A of the Income Tax Act:The appellant challenged the addition made by the Assessing Officer under section 14A, contending that the CIT(A) confirmed the addition without duly considering the detailed submissions. The appellant argued that the dividend income of Rs. 78,39,813 was incidental and should not have been disallowed to the extent of Rs. 40,46,763. The appellant sought a reduction in the disallowance amount, claiming it was excessive.Issue 3: Whether the dividend income is incidental to the main trading activity:The appellant questioned the characterization of the dividend income as incidental, arguing that it was a byproduct of the main trading activity. The appellant contended that the disallowance under section 14A was disproportionate to the nature of the dividend income, which they claimed was unintentional.Issue 4: Approval process for reopening assessment:The appellant raised concerns about the approval process for reopening the assessment, alleging that the approval by the Joint Commissioner of Income Tax (JCIT) lacked proper application of mind. The appellant argued that the absence of approval by the CIT, as mandated by section 151 of the Act, rendered the reopening void. Additionally, the appellant claimed that the reopening was initiated to address audit objections, further questioning the validity of the process.Issue 5: Justifiability of the actions taken by the Assessing Officer and CIT(A):The CIT(A) dismissed the appellant's challenge to the reopening of the assessment, citing compliance with procedural requirements. However, the Tribunal found the CIT(A)'s order to be non-speaking and lacking consideration of the appellant's objections. As a result, the Tribunal set aside the CIT(A)'s decision and remanded the case for a fresh determination, emphasizing the need for a detailed and reasoned order. The Tribunal allowed the appeal for statistical purposes, indicating a procedural victory for the appellant.In summary, the judgment addressed various issues related to the validity of the assessment reopening, the disallowance under section 14A, the characterization of dividend income, the approval process, and the justifiability of actions taken by the Assessing Officer and CIT(A). The Tribunal's decision highlighted procedural shortcomings in the CIT(A)'s order and remanded the case for further consideration, providing an opportunity for the appellant to present their case effectively.