2020 (4) TMI 479 - AT - Income Tax

Appeal granted, reassessment order quashed, clarity on income quantification for valid reopening

The Tribunal allowed the appeal, quashed the reassessment order, and emphasized the necessity of quantifying the escaped income for a valid reopening ... Validity of reopening of the assessment u/s 147 - return was processed under section 143(1) - notice beyond four years - Bogus LTCG claimed - HELD THAT:- Reference to reason would indicate that the AO has nowhere quantified the income escaped. Notice has been issued after an expiry of four years from the end of the relevant assessment year, but before six years. This notice could be issued within limitation if the AO has made out a case that income exceeded rupees one lakh has escaped assessment. No such finding or observation or reference has been made in the reasons extracted (supra). In the opening line of the reasons, the AO has observed that as per information received from the ITO, Ward-16(1), Mumbai, the assessee carried out transaction in shares/securities with M/s.Gold Star Finvest. This information is factually incorrect or not cross-verified by the AO before recording reasons. The assessee has not carried out its share/security transaction with Gold Star Finvest in respect of which capital gain arose to the assessee stand ultimately considered by the AO for denial of exemption under section 10(38) of the Act. Further, a perusal of the reasons would indicate that there is no coherence between the information available with the AO visà-vis transaction of the assessee, and formation of belief that income has escaped the assessment. These reasons are vague and inconclusive. On the basis of such reasoning, the assessment assessee cannot be reopened. Respectfully following the judgment of Hon’ble jurisdictional High Court in the case of Bakulbhai Ramanlal Patel Vs. ACIT [2011 (3) TMI 1576 - GUJARAT HIGH COURT] allow this ground of appeal and quash the re-assessment order. - Decided in favour of assessee. Issues:1. Reopening of assessment under section 147 of the Income Tax Act, 1961.Analysis:The appellant challenged the reopening of the assessment and addition made on merit before the Tribunal. The Assessing Officer (AO) reopened the assessment based on information received regarding alleged fraudulent activities by certain entities. The appellant argued that the reasons provided for reopening were vague and lacked coherence, as the AO did not quantify the income alleged to have escaped assessment. The appellant contended that the notice issued under section 148 was beyond the limitation period as the AO failed to establish that the income exceeded the threshold for reopening. The appellant cited a judgment by the Hon'ble Gujarat High Court to support their argument regarding the lack of quantification of escaped income.In response, the Department argued that the AO had sufficient information to believe that the appellant had engaged in fraudulent transactions involving long-term capital gains claimed as exempt under section 10(38) of the Act. The Department maintained that the reasons provided for reopening were based on concurrent information and justified the reassessment.The Tribunal carefully examined the reasons recorded by the AO and noted that the AO had not quantified the income that allegedly escaped assessment. Citing the judgment of the Hon'ble jurisdictional High Court, the Tribunal emphasized the importance of quantifying the escaped income for a valid reopening under section 147. The Tribunal found the reasons provided by the AO to be vague and inconclusive, lacking coherence between the information available and the formation of belief that income had escaped assessment. Consequently, the Tribunal allowed the appeal, quashed the reassessment order, and did not delve into other grounds on merit.In conclusion, the Tribunal held that the reassessment was invalid due to the vague and inconclusive reasons provided by the AO, emphasizing the necessity of quantifying the escaped income for a valid reopening under section 147. The appeal of the assessee was allowed, and the reassessment order was quashed.