By TIOL News Service

MUMBAI, MAY 08, 2018: THE ISSUE BEFORE THE BENCH IS - Whether ITO is permitted to reopen any concluded assessment, on basis of borrowed satisfaction of the audit party. NO IS THE VERDICT.

Facts of the case:

The Assessee, an individual, had filed his return for the relevant A.Y and the same was taken up for scrutiny. During the course of assessment, detailed letters were filed by assessee giving complete details of the transactions relating to the purchase and sale of flats in a building known as 'Tanhee Heights' resulting in capital gains. Thus, the same was subject of consideration leading to assessment order u/s 143(3). Subsequently, a notice u/s 148 was issued by the AO seeking to reopen the assessment for A.Y 1994-95. The CIT(A) however set aside the reassessment, holding that the re-opening notice was without jurisdiction. On further appeal, the ITAT also held that the exercise of re-opening the assessment was without jurisdiction, on the ground that the entire issue of capital gains on which the reopening notice was issued was the subject matter of consideration during the regular assessment proceedings u/s 143(3). Moreover, the ITAT referred to the reasons recorded for reopening and concluded that there was absence of application of mind by the AO and the reopening notice was issued on borrowed satisfaction i.e. on the basis of audit objection.

High Court held that,

++ it is found that both the CIT(A) as well as the Tribunal have held that the re-opening notice is without jurisdiction. During the regular assessment proceedings leading to the assessment order u/s 143(3), the assessee had furnished all information in respect of the issue of capital gains. Therefore, the AO had applied his mind to the facts and the law while passing the order of regular assessment. The decision in the case of Beena K. Jain being relied upon by the Revenue in support of the re-opening notice was available at the time when the regular assessment order u/s 143 was passed. Therefore, it would not be fair to presume that the AO was ignorant of the decision rendered by this Court. Moreover, as the impugned order of the Tribunal itself records that the reasons recorded in support of the impugned notice was merely on the basis of borrowed satisfaction of the audit party, this also makes the impugned notice bad.

(See 2018-TIOL-837-HC-MUM-IT)