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Kumaragiri Steels Ltd., Chennai vs DCIT | ITAT Chennai 2022 | BharatTax

KUMARAGIRI STEELS LTD.,CHENNAI vs. DCIT, CHENNAI

ITA 1501/CHNY/2014Status: DisposedITAT Chennai21 February 2022AY 2006-076 pages

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Cases cited in this judgment

Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.

CIT v. Kelvinator of India Ltd.
320 ITR 561 · 2010 · SC
1,630 citing
CIT v. Orient Craft Ltd.
354 ITR 536 · 2013 · HC
366 citing

Income Tax Appellate Tribunal, “D” BENCH, CHENNAI

Before: SHRI C.M. GARG, JM & SHRI MANJUNATHA G, AM

Hearing: 17/02/2022Pronounced: 21/02/2022

O R D E R Per Bench: The assessee has filed this appeal against the order passed by the ld. CIT(A)-II, Chennai dated 28.03.2014 for the assessment year 2006- 2007. 2. As agreed by both the parties, first of all, we heard the arguments of both the sides on ground Nos.1, 2 & 3, which read as under :-

1.

1. 1. The order of The Commissioner of Income Tax (Appeals)-II, Chennai-600034 dated 28.03.2014 in for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.

2. The CIT(Appeals) erred in sustaining the assumption of jurisdiction u/s.147 of the Act and erred consequently in confirming the re-assessment framed u/s.143(3) r/w section 147 of the Act without assigning proper reasons and justification.

3. The CIT(Appeals) failed to appreciate that the order of re- assessment under consideration was passed out of time, invalid, passed without jurisdiction and not sustainable both on facts and in law.

3.

Ld. AR of the assessee submitted that at the time of initiation of reassessment proceedings u/s.147 of the Act and issuing notice u/s.148 of the Act, there was no new tangible material in the hands of the AO which was not before him at the time of original assessment. He submitted that the fundamental requirement of initiation of reassessment proceedings and issuing notice is that there should be new tangible material in the hands of the AO and on the basis of such material, he must have reason to believe that income pertaining to that particular assessment year as escaped assessment. In absence of such requirement, initiation of reassessment proceedings and notice u/s.148 of the Act has to be held as bad in law and invalid, therefore, the impugned reassessment order and all consequent orders may kindly be quashed.

4.

Replying to the above, ld. Sr. DR drew our attention towards copy of the order dated 22.10.2010 by which the AO rejected the objection petition vide dated 05.10.2010 of the assessee against initiation of reassessment proceedings and issuance of notice u/s.148 of the Act. Ld. Sr. DR also submitted that in this year the AO has recorded the reasons for initiation of reassessment proceedings, therefore, legal contention of the ld. AR of the assessee are not tenable and, thus, the same may kindly be dismissed 5. On careful consideration of rival submissions, first of all, we may point out the observations of the Hon’ble Supreme Court in the case of Commissioner of Income Tax vs. Kelvinator of India Ltd. [2010] 320 ITR 561, wherein the Hon’ble Supreme Court has held that the concept of Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen an assessment, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. In this context, the observations of Hon’ble apex Court at page 564 are very relevant, which are reproduced as follows: “Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to re-assess. But reassessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in- built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. “ 6. Therefore, this is a basic requirement of law that at the time of initiation of reassessment proceedings u/s.147 of the Act and issuing notice u/s.148 of the Act, the AO must have new tangible material in his hands and on the basis of such material, he has to record reason to believe that some income has escaped assessment for the relevant assessment year. This is a mandatory requirement which is required to be complied with otherwise initiation of reassessment proceeding and issuing of notice has to be held as bad in law and invalid. In the present case, as AO in the first page of reassessment order passed u/s.143(3) r.w.s.147 of the Act dated 31.12.2012, which reads as under :- “The assessee company filed the return of income on 28/11/2006 admitting NIL return. The return was processed u/s.143(1) on 10/7/2009. This case was reopened by issuing notice u/s.148 on 6/1/2010 for the following reasons : “The assessee stopped its business activities from the year 1994. The assessee has no income other than sundry creditors written back. Hence, as per sec.72, carry forward business loss cannot be set off when there is no business activity. Land, building and plant and machinery whose value as per books is ₹1,10,88,186/- has been transferred for only ₹13.5 lakhs and claimed long term capital loss. Factory building has been sold for ₹1,12,814/-“ 7. From the vigilant and careful reading of above reasons, we are unable to see any mention by the AO regarding any new tangible material which was not before him while processing the original assessment order u/s.143(1) of the Act. Even we are unable to see any noting of the AO that any other income chargeable to tax has escaped assessment which came to notice subsequently by way of new tangible material, therefore, he has reason to believe that income has escaped assessment for that particular assessment year.