Issue decided on merits by ITAT cannot again be subject matter of reopening of assessment under section 147
In a recent judgment, ITAT Delhi has held that once the issue has been decided on merits by the Tribunal, being the highest fact finding authority and a categorical finding has been given regarding the genuineness of the transaction, the very same transaction cannot again be made the subject matter of reopening of assessment under section 147
ABCAUS Case Law Citation:
ABCAUS 4143 (2024) (07) ITAT
In the instant case, the assessee had challenged the validity of reopening and completion of assessment under section 147 of the Income Tax Act, 1961 (the Act).
The appellant assessee was a company. For the assessment year under dispute, the assessee filed its return of income declaring nil income. Assessee’s case was selected for scrutiny. The original assessment was completed under section 143(3) of the Act making addition under section 68 of the Act. The addition was made was on account of bogus share application money/premium received.
The first appellate authority being satisfied that the alleged bogus share application money was genuine, deleted the addition. Challenging the order of first appellate authority, the Revenue preferred an appeal before the Income Tax Appellate Tribunal (ITAT).
While the appeal before the ITAT was pending, the Assessing Officer on the basis of information received from investigation wing that the asssessee was a beneficiary of accommodation entry with respect to the said share application money, reopened the assessment under section 147 of the Act by issuing a notice under section 148 of the Act.
The assessee filed an objection before the Assessing Officer stating that the issue having already been examined in the original assessment proceedings and the addition having been deleted by the first appellate authority and Revenue’s appeal challenging such deletion, being pending before the ITAT, the reassessment proceeding should be kept in abeyance.
However, the AO proceeded to complete the assessment under section 143(3)/147 of the Act and again made the addition under section 68 of the Act towards the said share application money received.
Meanwhile, the Revenue’s appeal against the order of Commissioner (Appeals) in original assessment was dismissed by ITAT on merits.
The Tribunal opined that when the very same issue, on which the Assessing Officer reopened the assessment was the subject matter of dispute in the original assessment proceedings and the Assessing Officer, in fact, made the addition towards share application money by treating it as unexplained cash credit under section 68 of the Act. Therefore, it was nothing but review of the earlier assessment order, which is impermissible under the provisions of the Act.
The Tribunal observed that as per third proviso to section 147 of the Act, the Assessing Officer has power to assess or re-assess such income, other than the income involving maters, which are the subject matter of any appeal, reference or revision. In the present case, the item of escaped income assessed by the Assessing Officer was not only the subject matter of dispute in the original assessment order, but the matter was also dealt with by the first appellate authority on merits and the addition was deleted. The Tribunal opined that therefore, assessee’s case was fully covered under the third proviso to section 147 of the Act. The very same issue having been considered by first appellate authority and thereafter by the Tribunal could not have been made subject matter of addition in the reassessment proceedings in view of specific bar contained in the third proviso to section 147 of the Act. For this reason also, the reopening of assessment and the consequent addition was invalid.
Further, the Tribunal noted that in the earlier proceedings, it had dealt with the legality of the addition on merits and upheld the order passed by the CIT(A).
The Tribunal held that once the issue has been decided on merits by the Tribunal, being the highest fact finding authority and a categorical finding has been given regarding the genuineness of the transaction, the very same transaction cannot again be made the subject matter of reopening of assessment under section 147 of the Act. Thus, the reopening of assessment under section 147 of the Act has to be declared as invalid and wholly without jurisdiction.
Accordingly, the Tribunal quashed the order passed under section 143/147 of the Act.
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