2020 (1) TMI 460 - AT - Income Tax

Tribunal Invalidates Reassessment, Quashes Tax Commissioner's Order

The Tribunal quashed the Principal Commissioner of Income Tax's order under section 263, restoring the reassessment order. The reassessment proceedings ... Revision u/s 263 - reassessment u/s 147 - AO was satisfied the explanation of the assessee with regard to Accommodation entries. - Assessee submitted that, assessment was reopened based on mere Investigation Wing appraisal report - Revenue submitted that, assessment erroneous as well as prejudicial to the interests of the Revenue because A.O. has not examined the seized material found during the course of search. Held that:- it is clear that the Addl. CIT and Ld. Pr. CIT while granting approval for reopening of the assessment under section 147/148 of the I.T. Act merely stated “Yes”, which would show that they have not applied their independent mind and merely accorded sanction without going through any material on record. The issue is thus covered against the Revenue by the aforecited decisions in which even on more facts the approval was not found valid. Reopening of the assessment in this case is invalid, bad in law and therefore, such re-assessment proceedings could not be reopened under section 263 of the I.T. Act, 1961. It may also be briefly noted that the A.O. in the reasons recorded in the assessment order has mentioned that assessee has received accommodation entries in assessment year under appeal from five parties in a sum of ₹ 70 lakhs and after reopening of the assessment, A.O. called for the details and documents from the assessee and was satisfied with the explanation of assessee, therefore, the of proceedings under section 263 of the I.T. Act by the Ld. Pr. CIT could not have substituted the view taken by the A.O. Revision order quashed and set aside. Issues Involved:1. Validity of reopening of assessment under section 147/148 of the Income Tax Act, 1961.2. Validity of the approval granted under section 151 of the Income Tax Act, 1961.3. Whether the reassessment proceedings can be revised under section 263 of the Income Tax Act, 1961.4. Examination of the seized material and its impact on the assessment.5. Whether the Principal Commissioner of Income Tax (Pr. CIT) can substitute the view of the Assessing Officer (A.O.) under section 263 of the Income Tax Act, 1961.Detailed Analysis:1. Validity of Reopening of Assessment under Section 147/148:The Tribunal examined the reasons recorded for reopening the assessment and found that the Assessing Officer (A.O.) had merely reproduced the information received from the Investigation Wing without applying his independent mind. The reasons recorded were based on incorrect facts and did not demonstrate a link between the tangible material and the formation of reasons to believe that income had escaped assessment. The Tribunal relied on several judgments, including those of the Delhi High Court in the cases of Pr. CIT vs. RMG Polyvinyl (I) Ltd., Pr. CIT vs. Meenakshi Overseas (P) Ltd., and Pr. CIT vs. G & G Pharma India Ltd., which held that reopening of assessment based on borrowed satisfaction without independent application of mind is invalid and bad in law.2. Validity of the Approval Granted under Section 151:The Tribunal scrutinized the approval granted by the Additional Commissioner of Income Tax and the Principal Commissioner of Income Tax (Pr. CIT) for reopening the assessment. It was noted that the approval was given in a mechanical manner with the mere statement 'Yes, I am satisfied.' The Tribunal referred to the judgments of the Delhi High Court in the case of United Electrical Co. Pvt. Ltd. and the Supreme Court in the case of CIT vs. S. Goyanka Lime & Chemicals Ltd., which held that such mechanical approvals without application of mind render the reopening of assessment invalid.3. Whether the Reassessment Proceedings Can Be Revised under Section 263:The Tribunal held that since the reassessment proceedings were invalid and bad in law, they could not be revised under section 263 of the Income Tax Act. It relied on the ITAT Delhi Bench's decision in the case of M/s. Supersonic Technologies Pvt. Ltd., which stated that only a valid reassessment order can be revised under section 263. The Tribunal emphasized that the Principal Commissioner of Income Tax (Pr. CIT) cannot assume jurisdiction under section 263 based on an invalid reassessment order.4. Examination of the Seized Material and Its Impact on the Assessment:The Tribunal noted that the A.O. had not examined the seized material found during the search in the case of Shri S.K. Jain and Shri Virendra Jain. The Principal Commissioner of Income Tax (Pr. CIT) had directed the A.O. to frame the assessment afresh by conducting proper inquiries about the source of investment. However, the Tribunal found that the A.O. had already examined the detailed evidences filed by the assessee and accepted the return of income. The Tribunal held that the reassessment order could not be set aside merely because the A.O. did not examine the seized material, especially when the assessee had provided sufficient evidence to prove the genuineness of the transactions.5. Whether the Principal Commissioner of Income Tax (Pr. CIT) Can Substitute the View of the Assessing Officer (A.O.) under Section 263:The Tribunal held that the Principal Commissioner of Income Tax (Pr. CIT) cannot substitute the view taken by the A.O. with his own view under section 263 of the Income Tax Act. The A.O. had accepted the genuineness of the transactions after examining the documentary evidence and material on record. The Tribunal emphasized that the Pr. CIT cannot set aside the reassessment order merely because he has a different view on the matter. The Tribunal relied on the judgment of the Delhi High Court in the case of CIT vs. Sunbeam Auto Ltd., which held that the Commissioner cannot brand an assessment order as erroneous simply because, according to him, it should have been written more elaborately.Conclusion:The Tribunal quashed the order of the Principal Commissioner of Income Tax (Pr. CIT) passed under section 263 of the Income Tax Act and restored the reassessment order dated 05.12.2016 under section 147/143(3) of the Income Tax Act. The appeal of the assessee was allowed, and all additions made in the reassessment order were deleted. The Tribunal held that the reopening of the assessment was invalid and bad in law, and therefore, the reassessment proceedings could not be revised under section 263 of the Income Tax Act.