2021 (6) TMI 497 - AT - Income Tax

Tribunal quashes assessment based on invalid reopening under Income-tax Act

The Tribunal allowed the appeal, quashing the assessment order under section 143(3) r.w.s. 147 due to an invalid reopening of assessment under section 147 ... Validity of reopening of assessment u/s 147 - addition of broken period interest - HELD THAT:- In reply to SCN the assessee has furnished its reply explaining the reason for offering interest income of ₹ 1,04,08,502/- as against amount of ₹ 1,33,76,712/-. After receiving the aforesaid reply of the assessee, there was complete silence at the end of the assessing officer and suddenly, after more than two and half years, the assessing officer again sprang into action by issuing notice under section 148 of the Act on 30-03-2016. Thus, the aforesaid facts clearly demonstrate that, though, the assessing officer himself was satisfied that the assessee had correctly offered the interest income; however, only because of the audit objection, he initiated the proceedings under section 147 of the Act. That being the case, the reopening of assessment under section 147 of the Act, being merely on borrowed satisfaction, is invalid. The materials placed before us clearly demonstrate that in course of original assessment proceedings, not only the assessing officer has made thorough enquiry with regard to the disputed issue on which the assessment has been reopened, but the assessee has also furnished all relevant and necessary materials to justify the income offered by it. That being the case, we are of the considered opinion that the reopening of assessment in the present case is invalid and void ab-initio. - Decided in favour of assessee. Issues Involved:1. Validity of reopening of assessment under section 147 of the Income-tax Act, 1961.2. Merits of the addition of broken period interest of Rs. 29,68,150/-.Issue 1: Validity of Reopening of Assessment under Section 147 of the Income-tax Act, 1961The assessee challenged the reopening of the assessment under section 147 after the expiry of four years from the end of the relevant assessment year. The original assessment was completed under section 143(3), accepting the returned income. The assessing officer reopened the assessment, claiming that the assessee had offered less interest income than shown as receivable, leading to the conclusion that income chargeable to tax had escaped assessment.The assessee argued that all material facts were disclosed during the original assessment, and the assessing officer had conducted thorough inquiries, including specific queries about the interest receivable. The assessee provided detailed responses and supporting documents, which the assessing officer accepted when completing the original assessment.The Tribunal observed that the assessing officer had revisited the same material considered during the original assessment without any new tangible material indicating escapement of income. The reopening was based on a mere change of opinion, which is impermissible. Additionally, the reopening was influenced by an audit objection, indicating borrowed satisfaction rather than independent application of mind by the assessing officer.The Tribunal concluded that the reopening of the assessment under section 147 was invalid due to the absence of failure on the part of the assessee to disclose material facts fully and truly, and the lack of new tangible material. Therefore, the assessment order passed under section 143(3) r.w.s. 147 was quashed.Issue 2: Merits of the Addition of Broken Period Interest of Rs. 29,68,150/-Since the Tribunal quashed the assessment order on the grounds of invalid reopening, the merits of the addition of broken period interest were not adjudicated. The Tribunal noted that the issue raised in ground 2 was rendered redundant but kept it open for adjudication if it arises in the future.Conclusion:The appeal was allowed, and the assessment order passed under section 143(3) r.w.s. 147 was quashed due to invalid reopening. The merits of the addition of broken period interest were not addressed, as the primary issue of reopening was decided in favor of the assessee.