Rajesh Gupta (HUF) vs ITO: Reopening of Assessment Proceedings for AY 2011-12

Rajesh Gupta (HUF) vs ITO: Reopening of Assessment Proceedings for AY 2011-12

Case Number: ITA 5712/DEL/2019

Appellant: Rajesh Gupta (HUF), New Delhi

Respondent: ITO Ward – 31(4), New Delhi

Assessment Year: 2011-12

Case Filed On: 2019-07-01

Order Type: Final Tribunal Order

Date of Order: 2021-04-19

Pronounced On: 2021-04-19

Background

The case involves Rajesh Gupta (HUF) as the appellant and the Income Tax Officer, Ward 31(4), New Delhi, as the respondent. The central issue revolves around the reopening of assessment proceedings under Section 147/148 of the Income Tax Act, 1961, for the assessment year 2011-12.

Reason for Filing the Case

Rajesh Gupta (HUF) filed the case challenging the order of the Assessing Officer (AO) dated 28.03.2018, which initiated the reopening of the assessment proceedings. The appellant contended that the AO’s order was without jurisdiction, mechanical, and based on borrowed satisfaction, thus unsustainable in law.

Tribunal Proceedings

On 19th April 2021, the tribunal, comprising Shri R.K. Panda, Accountant Member, heard the case through video conferencing.

The appellant was represented by Sh. Raj Kumar, CA, and Sh. Aman Gupta, CA. The respondent was represented by Sh. Farat Khan, Sr. DR.

Arguments Presented

The appellant argued that the reopening of the assessment proceedings was unjustified and against the principles laid down in various judicial pronouncements. They contended that:

• The AO did not independently apply his mind and initiated the proceedings based on information from the Investigation Wing, which is considered borrowed satisfaction.
• The reasons recorded for reopening the assessment were based on incorrect facts, as the appellant had declared the long-term capital gains in the original return of income.
• The approval for reopening under Section 151 was defective and mechanical.

The respondent, on the other hand, supported the AO’s order and argued that the reopening of the assessment was justified based on the information received from the Investigation Wing.

Tribunal’s Decision

The tribunal considered the rival submissions and the material placed on record. The key points from the tribunal’s order are as follows:

Reopening of Assessment Proceedings

The tribunal noted that the reopening of the assessment proceedings was based on information from the Investigation Wing regarding suspicious transactions in penny stocks of M/s DMC Education Ltd. The AO alleged that the appellant had not declared the transaction amounting to Rs. 1,90,800 in the return of income, which led to the reopening of the assessment.

However, the tribunal observed that the appellant had indeed declared the long-term capital gains from the sale of shares in the original return of income and claimed the exemption. The AO had not verified the return of income before reopening the assessment, indicating a lack of independent application of mind.

Borrowed Satisfaction

The tribunal emphasized that the reopening of the assessment based on borrowed satisfaction from the Investigation Wing, without independent verification by the AO, was not in accordance with law. The tribunal referenced various judicial pronouncements, including CIT vs. Kamdhenu Steel & Alloys Ltd., CIT vs. Sh. Atul Jain and Vinit Jain, and PCIT vs. Meenakshi Overseas (I) Ltd., which supported the appellant’s case.

Quashing the Reassessment

In light of the above observations, the tribunal quashed the reassessment proceedings initiated under Section 147/148 of the Act as being bad in law. Consequently, the reassessment order passed by the AO was also quashed.

Conclusion

The tribunal upheld the appellant’s challenge against the reopening of assessment proceedings under Section 147/148 for the assessment year 2011-12. The tribunal quashed the reassessment proceedings and the subsequent order passed by the AO, deeming them invalid and unsustainable in law.

Order pronounced on: 19/04/2021

Signatories:

SHRI R.K. PANDA, Accountant Member

Dated: 19/04/2021

Copy forwarded to:

• Appellant
• Respondent
• CIT
• CIT (Appeals)
• DR: ITAT

ASSISTANT REGISTRAR

ITAT NEW DELHI

Rajesh Gupta (HUF) vs ITO: Reopening of Assessment Proceedings for AY 2011-12