ITAT disallows reopening of assessment on wrong assumption of facts

The Income Tax Appellate Tribunal (ITAT) in the case of M/s R.S. Associates Vs DCIT held that the reopening on the wrong assumption of facts by the assessing officer cannot be sustained.

In this matter, the assessment was completed u/s 143(3) of the Income Tax Act, 1961 (The Act). Subsequently, assessing officer had reasons to belive that income had escaped assessment and therefore made disallowance. Aggrieved by the order, the assessee had filed an appeal before the CIT(A) whereas the CIT(A) considered the grounds of appeal, submissions of the assessee, findings of the A.O. and granted the marginal relief to the extent of claim of work in progress and partly allowed the assessee appeal. Aggrieved by the CIT(A) order, the assessee has filed an appeal with the Hon’ble Tribunal.

Before ITAT, ld ArR submitted that the CIT(A) has erred in confirming the validity of reassessment proceedings as the assessment was reopened on the wrong assumption of facts and relying on the same set of material which was available with the A.O. in the original assessment proceedings and was a mere change of opinion. The Ld. AR restricted his submissions to the extent of validity of reassessment proceedings and substantiated the arguments/ submissions with the paper book and judicial decisions and prayed for allowing the appeal. Contra, the Ld. DR supported the order of the CIT(A) on the validity of re-assessment.

ITAT in its order held that the provisions of Section 148 of the Act had to invoked only when the A.O. had reason to believe that the income had escaped assessment where as the A.O. had ventured on a wrong assumption of facts though the agreement was available on hand with the A.O. in the original assessment proceedings. Further there is no tangible material was brought to the knowledge by the Ld.DR to come to a conclusion that there is an income escaping the assessment. Therefore, the reassessment is bad in law and quash the assessment order passed u/s 143(3) r.w.s 147 of the Act.

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