Reopening limitation period not stood extended merely for passing reference made by ITAT

Reopening limitation period not stood extended merely for passing reference made by the ITAT when assessee was not a party to the case and was not given opportunity of being heard.

ABCAUS Case Law Citation:
ABCAUS 2700 (2019) (01) ITAT

Important Case Laws Cited/relied upon:
Rural Electrification Corporation Ltd. vs. CIT & Anr 355 ITR 345 (Del.)
Lotus Investment Ltd. vs. G.Y. Wagh, ACIT & Ors. 288 ITR 459 (Bom)

In the case of the father of the appellant assessee, the Assessing Officer (AO) had made an addition as unexplained investment u/s 69 of the Income Tax Act, 1961 (the Act) for investment made in renovation of the house.

However the Coordinate Bench of the Tribunal had deleted the addition on ground that the house did not belong to the father of the assessee and Assessing Officer (AO) could not produce any cogent material or evidence that the expenses for renovation were incurred by the father.

While allowing the ground of appeal the Tribunal made a passing reference that if any addition was to be made for the renovation of the house, it should be made in the hands of the mother of the assessee as well as the son of the Assessee to whom the house belonged.

Based on the remark of the Tribunal as above, the case of the son (the assessee/the appellant assessee) was reopened u/s 147 of the Act after recording reasons. Notice u/s 148 of the Act was issued and served upon the assessee by speed post.

Subsequently, the assessing officer made addition in respect of renovation made in the house.

The appellant assessee submitted that the proceedings so initiated were bad in law and barred by limitation.

It was submitted that the reasons for initiation for proceedings was by virtue of observation made by the Coordinate Bench of the Tribunal. He submitted that the Tribunal had merely expressed its opinion about taxability of the amount. He submitted that the observation of the Tribunal would not extend the period of limitation as prescribed under the statute as the notice u/s 148 of the Act was issued well beyond the prescribed limit of limitation.

The assessee contended that the Tribunal while making such observation had not made the assessee as a party, even not given opportunity to make submissions. He further submitted that passing reference cannot be construed as the direction of the Tribunal.

He further submitted that even otherwise also no direction can be given contrary to any provision of law. If the finding of the authorities below were confirmed that would tantamount to giving unlimited period to revenue for making assessment and reassessment of the income.

The Tribunal observed that undisputedly the assessee was not a party before the Coordinate Bench of the Tribunal. Even no notice of hearing was given to the assessee by the Tribunal.

The Tribunal opined that as the assessee was not given opportunity of being heard, the normal period of limitation would apply to the case as per the notice issued u/s 148 of the Act and assessment framed thereafter was clearly barred by time.

Accordingly, the Tribunal quashed the assessment framed for being time barred.

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