2024 (12) TMI 1113 - HC - Income Tax

Assessment reopening beyond limitation invalid without specific findings from prior proceedings under Section 150

Delhi HC held that AO improperly invoked Section 150 to reopen assessment for AY 2007-08 beyond limitation period under Section 149. Court ruled that ... Reopening of assessment by invoking section 150 - whether the provisions of Section 150 of the Act were appropriately invoked by the AO for the purpose of reopening the assessment for the AY 2007-08 in respect of the assessee herein? - HELD THAT:- The language of Section 150 (1) of the Act is also relevant for the purposes of determining whether a notice u/s 148 could be issued notwithstanding the period of limitation stipulated u/s 149 of the Act. The non obstante clause of Section 150 (1) of the Act is applicable only where a notice u/s 148 of the Act is required to give effect to any finding or direction contained in any order passed by any authority in any proceedings under the Act. It is clear that the nature of the findings or directions contemplated are such that a notice u/s 148 of the Act is warranted for the purposes of giving effect to the findings. The findings are required to be dispositive of the issue concerned and only the procedure is required to be involved to give effect to the same. We are unable to accept that any of the orders passed in the case of Sh. Pawan Kumar Bansal and Sh. Mahesh Kumar Bansal are dispositive of the assessee’s liability to pay tax and therefore, no notice u/s 148 of the Act was warranted for giving effect to any such finding. We hold that it is clear from the perusal of the order of the Coordinate Bench of this Court [2015 (8) TMI 373 - DELHI HIGH COURT] as well as the order of the learned ITAT, CIT(A) that in none of the orders, there was any finding or direction that the undisclosed income of Rs. 7 crores was required to be assessed to tax in the hands of the assessee, which warranted issuance of notice u/s 148 of the Act to give effect to such finding or direction. We are thus of the view that in the present case, the learned CIT(A) and the learned ITAT have rightly examined the decisions [2014 (10) TMI 221 - ITAT DELHI] and connected matters, and of Coordinate Bench of this Court in [2015 (8) TMI 373 - DELHI HIGH COURT], and held that there was no finding or direction given by the Courts on the basis of which powers u/s 150 of the Act could have been invoked for issuance of notice u/s 148 of the Act beyond the period stipulated u/s 149 of the Act. We opine that the conditions set out in Section 150 of the Act were not fulfilled in the present case, and the reassessment proceedings could not have been initiated by the AO by issuing notice under Section 148 of the Act, and the learned ITAT made no error in holding so. Decided in favour of the assessee. Issues Involved:1. Whether the provisions of Section 150 of the Income Tax Act, 1961 were appropriately invoked by the Assessing Officer (AO) for reopening the assessment for the Assessment Year (AY) 2007-08.2. Whether the Income Tax Appellate Tribunal (ITAT) erred in holding that the conditions stipulated under Section 150 of the Act were not satisfied.3. Whether the ITAT was justified in deleting the addition of Rs. 7 crores made on the basis of statements recorded during the search.Issue-wise Detailed Analysis:1. Invocation of Section 150 of the Income Tax Act, 1961:The central issue was whether the AO was justified in invoking Section 150 of the Act to reopen the assessment for AY 2007-08. Section 150 allows the issuance of a notice under Section 148 at any time for reassessment in consequence of or to give effect to any finding or direction in an order passed by an authority under the Act. The Court examined whether there was any such finding or direction in the orders of the ITAT or the High Court that necessitated the reopening of the assessment. It was concluded that neither the ITAT nor the High Court had issued a finding or direction that the income of Rs. 7 crores should be assessed in the hands of the assessee. Therefore, the invocation of Section 150 was deemed inappropriate.2. ITAT's Decision on Conditions Under Section 150:The ITAT had held that the conditions under Section 150 were not satisfied, as there was no finding or direction in the previous orders that the income of Rs. 7 crores should be assessed in the hands of the assessee. The Court supported this view, noting that the ITAT had correctly interpreted the scope of 'finding' and 'direction' as per judicial precedents. The Court emphasized that a 'finding' must be essential for resolving the specific case and directly related to the assessment year in question. The ITAT's decision was upheld as it was based on the lack of any such dispositive finding or direction in prior proceedings.3. Justification for Deleting the Addition of Rs. 7 Crores:The ITAT had deleted the addition of Rs. 7 crores made on the basis of statements recorded during the search. The Court examined the ITAT's reasoning, which highlighted contradictions in the statements of Sh. Pawan Kumar Bansal and the lack of corroborative evidence. The ITAT had noted that the disclosure of Rs. 7 crores was made on behalf of the Capital Group of Companies, not solely by the assessee. The Court agreed with the ITAT's approach of determining undisclosed income based on seized materials rather than unreliable statements. The deletion of the addition was found to be justified due to the absence of concrete evidence linking the income to the assessee.Conclusion:The Court concluded that the AO had erred in invoking Section 150 of the Act, as there was no requisite finding or direction in previous orders to justify reopening the assessment. The ITAT's decision to delete the addition of Rs. 7 crores was upheld, as it was based on a comprehensive analysis of the evidence and statements. The appeal by the Revenue was dismissed, and the question of law was answered in favor of the assessee.