2022 (7) TMI 1207 - AT - Income Tax

Tribunal quashes reopening under Income Tax Act, emphasizing substantial justice. Assessing Officer's failure renders reopening invalid.

M/s. Shivshakti Shetkari Sahakari Sakhar Karkhana Limited Versus DCIT, Circle-3, Nanded

M/s. Shivshakti Shetkari Sahakari Sakhar Karkhana Limited Versus DCIT, Circle-3, Nanded - TMI Issues Involved:1. Delay in filing the appeal.2. Validity of the impugned reopening under Section 147 of the Income Tax Act, 1961.Detailed Analysis:1. Delay in Filing the Appeal:The appeal filed by the assessee suffered from an 835-day delay. The delay was attributed to various communication gaps and approval requirements at the official level. The tribunal referred to the landmark decision in Collector, Land Acquisition vs. MST Katiji & Ors. (1987) 167 ITR 471 (SC), which emphasized that the cause of substantial justice must prevail over technical aspects. Consequently, the tribunal rejected the Revenue's objections and condoned the delay, noting that it was neither intentional nor deliberate.2. Validity of the Impugned Reopening:The primary legal issue was the validity of the reopening under Section 147 of the Income Tax Act, 1961. The reopening was initiated based on information from the DGIT(Inv), Mumbai, regarding hawala transactions in bogus purchases amounting to Rs. 11,29,218/-. However, the Assessing Officer disallowed excess payments made to members amounting to Rs. 1,29,14,547/-, which was upheld by the CIT(A).The tribunal observed that the lower authorities did not make any disallowance or addition pertaining to the sole reason for reopening. Citing the case of CIT vs. Jet Airways (2011) 331 ITR 236 (Bom), the tribunal noted that the reopening was not sustainable in law. The tribunal emphasized that the Assessing Officer must assess or reassess the income which he had reason to believe had escaped assessment and also any other income that comes to his notice subsequently during the proceedings. If the income, which was the basis for the formation of the reason to believe, is not assessed or reassessed, it would not be open to the Assessing Officer to independently assess other income that comes to his notice subsequently.The tribunal referred to the legislative intent and judicial precedents, including the judgments of the Punjab and Haryana High Court, the Kerala High Court, and the Rajasthan High Court. The tribunal concluded that the reopening was invalid as the Assessing Officer did not assess the income which was the basis for the formation of the reason to believe.Conclusion:The tribunal quashed the impugned reopening and rendered all other pleadings on merits as academic. The appeal was allowed in the above terms, and the order was pronounced in the Open Court on 14th July, 2022.