Re-opening of the assessment proceedings u/s 147/148 of the Income Tax Act are illegal in certain cases, says ITAT

Last updated: 25 June 2021

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The Income Tax Appellate Tribunal (ITAT) has ruled that re-opening assessment proceedings under Section 147/148 of the Income Tax Act can be illegal in specific circumstances. This ruling came about when the Tribunal found that assessments were re-opened without proper application of mind, particularly when additions were made on a protective basis. The ITAT clarified that if an investment was made in a different assessment year, re-opening for the incorrect year could be deemed unlawful.

Court :
ITAT Chandigarh

Brief :
These three appeals of three different assessees are being taken up together as in each of these appeals pertaining to 2011-12 assessment years, the issues and arguments remain identical. Accordingly, on the request of the parties, common order in all these appeals is being passed.

Citation :
ITA No. 1156/CHD/2019

IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH
BENCH ‘SMC’ CHANDIGARH

BEFORE: SMT. DIVA SINGH, JM
ITA No. 1152/CHD/2019

Assessment Year : 2011-12
Shri Ashish Chaudhry,
C-12, Focal Point,
Phase-V, Ludhiana.
PAN No: AASPC4446N
Appellant

The ITO,
Ward 1(1),
Ludhiana.
Respondent

Assessee by : Shri Vibhor Garg, C.A.
Revenue by : Smt. Meenakshi Vohra, Addl. CIT

ITA No. 1154/CHD/2019
Assessment Year : 2011-12

Shri Suresh Chaudhry,
C-12, Focal Point,
Phase-V, Ludhiana.
PAN No: AASPC4450C
Appellant

The ITO,
Ward 1(3),
Ludhiana.
Respondent

Assessee by : Shri Vibhor Garg, C.A.
Revenue by : Shri Ashok Khanna, Addl. CIT

ITA No. 1156/CHD/2019
Assessment Year : 2011-12

Shri Amit Chaudhry,
C-12, Focal Point,
Phase-V, Ludhiana.
PAN No: AASPC4449D
Appellant

The ITO,
Ward 1(1),
Ludhiana.
Respondent

Assessee by : Shri Vibhor Garg, C.A.
Revenue by : Smt. Meenakshi Vohra, Addl. CIT

Date of Hearing : 16.06.2021
Date of Pronouncement : 18.06.2021

Hearing conducted via Webex

ORDER

These three appeals of three different assessees are being taken up together as in each of these appeals pertaining to 2011-12 assessment years, the issues and arguments remain identical. Accordingly, on the request of the parties, common order in all these appeals is being passed.

2. For the sake of convenience, the issues as found addressed in ITA 1152/CHD/2019 are being taken up first. Herein the assessee is aggrieved by the order passed by the CIT(A)-I Ludhiana. Various grounds have been raised therein, however, the parties argued ground No. 2 & 3 in the present appeal. These read as under :

“2. That in the facts & circumstances of the case, the re-opening of the assessment proceedings u/s 147/148 are illegal, without jurisdiction and without application of mind as addition is made on protective basis and further ignored the fact that the investment was made in AY 2012-13 and not in AY 2011-12.

3. That the Ld Appellate Authority wrongly & illegally confirmed the protective assessment without a clear finding regarding the addition on protective basis.”

3. Referring to the submissions advanced on 06.05.2021 and 09.06.2021, the ld. Sr.DR invited attention to the reply of the department by way of information relatable to M/s KOC Industries Ltd. wherein the position and facts required to be addressed has been clarified. It has been informed that this very addition had been made on a substantive basis therein and by way of abundant caution had also been made in the case of the assessee on a protective basis so as to keep the department’s interest alive. Accordingly, elaborating her stand referring to submission made on earlier dates, it was submitted that the present appeal can accordingly be disposed off.

To know more in details find the attachment file

FAQ :

The re-opening of tax assessments under Section 147/148 of the Income Tax Act can be considered illegal if it's done without proper application of mind, or if the additions are made on a protective basis without clear findings. It can also be illegal if the investment in question relates to a different assessment year than the one being re-opened.

Making an addition on a 'protective basis' means the tax department makes an assessment to safeguard its interests, even if the primary assessment is substantive elsewhere. This is done to ensure that if the substantive assessment fails, the department's claim is still preserved.

The assessment year is crucial. If an investment was made in one assessment year, re-opening proceedings for a different assessment year based on that investment would be considered incorrect and potentially illegal.

The re-opening of assessments is dealt with under Section 147 and Section 148 of the Income Tax Act.

The ruling was made by the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench.