Facts of the Case

The assessee, Vedanta Resources Private Limited, filed its return of income for Assessment Year 2016-17 on 08.08.2016 declaring total income of ₹6,100. A survey under Section 133A was earlier conducted in the Saroj Group cases, during which information surfaced that certain companies had merged with the assessee and that alleged bogus investments aggregating to ₹12.06 crore existed as on 31.03.2016. Based on this information received from the Investigation Wing, the Assessing Officer reopened the assessment by issuing notice under Section 148 on 17.03.2021. The reassessment was completed under Section 147 on 31.03.2022 by making an addition of ₹12,03,48,105 as unexplained cash credit. The CIT(A) confirmed the reopening, against which the assessee filed a cross-objection before the Tribunal.

Issues Involved

Whether reassessment initiated under Sections 147 and 148 was valid when the reasons recorded were vague and based solely on investigation wing information, whether the reopening amounted to borrowed satisfaction without application of independent mind, and whether the reassessment order was barred by limitation as it was dispatched beyond the statutory time limit.

Petitioner’s Arguments

The Revenue contended that reopening was validly initiated on the basis of credible information received from the Investigation Wing regarding bogus investments and that the assessment order was passed within the prescribed limitation period.

Respondent’s Arguments

The assessee contended that the reasons recorded by the Assessing Officer were cryptic, vague, and merely reproduced the investigation report without demonstrating any live link between the material and formation of belief. It was argued that reopening based on borrowed satisfaction is invalid in law. The assessee further submitted that although the assessment order bore the date 31.03.2022, it was dispatched only on 02.04.2022 and served thereafter, rendering it barred by limitation as the order had not left the control of the Assessing Officer within the statutory period.

Court Order / Findings

The ITAT Kolkata held that the reasons recorded by the Assessing Officer were vague and lacked independent application of mind, constituting a clear case of borrowed satisfaction. The Tribunal observed that the Assessing Officer failed to demonstrate a live nexus between the information received and the belief that income had escaped assessment. Relying on the decisions of the Delhi High Court in Meenakshi Overseas (P.) Ltd. and the Bombay High Court in Shodiman Investments (P.) Ltd., the Tribunal held that the reopening was invalid in law. The Tribunal further held that an assessment order is deemed to be passed only when it leaves the control of the Assessing Officer. Since the order dated 31.03.2022 was dispatched on 02.04.2022, beyond the limitation period, the reassessment was also barred by limitation.

Important Clarification

The Tribunal clarified that reopening of assessment requires independent satisfaction of the Assessing Officer based on tangible material and cannot be sustained on mere reproduction of investigation wing reports. It was further clarified that for compliance with limitation provisions, an assessment order must be dispatched and leave the control of the Assessing Officer within the statutory time limit; mere signing or dating of the order is insufficient.

Final Outcome

The cross-objection filed by the assessee was allowed, and the reassessment proceedings initiated under Sections 147 and 148 along with the assessment order passed for Assessment Year 2016-17 were quashed as being without jurisdiction and barred by limitation. The appeal filed by the Revenue was dismissed.

 Source Link-

https://itat.gov.in/public/files/upload/1768298000-nzcwSr-1-TO.pdf

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