2019 (7) TMI 1215 - AT - Income Tax

Reopening of Assessment Invalid: Tribunal Dismisses Revenue's Appeal

DCIT, CC – 2 (1), Kolkata Versus M/s. Yaduka Financial Services Ltd.

DCIT, CC – 2 (1), Kolkata Versus M/s. Yaduka Financial Services Ltd. - TMI Issues Involved:1. Validity of reopening assessment under Section 147 after four years.2. Whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.3. Validity of the approval granted by the Commissioner under Section 151 of the Income Tax Act.Detailed Analysis:1. Validity of Reopening Assessment under Section 147 after Four Years:The case revolves around the reopening of the assessment for the Assessment Year (AY) 2009-10. The assessee had initially filed its return of income declaring a total income of Rs. 2,80,100/-. During the Financial Year (FY) 2008-09, the assessee received share subscription money aggregating to Rs. 86.27 crores. The original assessment was completed under Section 143(3) on 19.12.2011, where the Assessing Officer (AO) had verified the share capital on a test-check basis. The case was reopened after more than four years via notice under Section 148 dated 22.03.2016. The reopening was based on information from a survey conducted on Ashika Group, which indicated that the share capital raised by the assessee was through paper/bogus/shell companies.2. Failure on the Part of the Assessee to Disclose Fully and Truly All Material Facts:The AO's reopening was challenged on the grounds that it did not specify any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Commissioner of Income Tax (Appeals) [CIT(A)] observed that the AO failed to point out any specific failure on the assessee's part in the recorded reasons for reopening. The CIT(A) held that the reopening was invalid as it did not meet the conditions precedent set out in the proviso to Section 147, which requires the AO to demonstrate that the escapement of income was due to the assessee's failure to disclose fully and truly all material facts necessary for the assessment.3. Validity of the Approval Granted by the Commissioner under Section 151:The approval for reopening the assessment was granted by the Principal Commissioner of Income Tax (Pr.CIT) with a mere endorsement of 'Yes. I agree.' This mechanical approval without detailed reasoning was challenged as being non-application of mind. The Tribunal noted that the approval must reflect the Commissioner’s satisfaction and should not be a mere formality. The Tribunal cited various judicial precedents emphasizing that the satisfaction of the Commissioner should be based on objective material and should demonstrate a clear link between the reasons recorded by the AO and the formation of belief that income has escaped assessment.Conclusion:The Tribunal upheld the CIT(A)'s decision to cancel the assessment framed under Sections 147/143(3) on the grounds that:- The reopening of the assessment did not comply with the conditions set out in the proviso to Section 147, as there was no specific failure on the part of the assessee to disclose fully and truly all material facts.- The approval granted by the Pr.CIT under Section 151 was mechanical and did not reflect due application of mind.The appeal by the Revenue was dismissed, confirming that the reassessment proceedings were invalid and the assessment order passed was without jurisdiction.