2010 (6) TMI 832 - AT - Income Tax

Summary

Issues involved: Reopening of assessment under Section 147, justification for escapement of income, disallowance of expenses.

Reopening of assessment under Section 147: The appeals were against the orders of the CIT(A) for assessment years under Section 144 r.w.s. 147 of the Income Tax Act, 1961. The main contention was the reopening of assessments under Section 147. The Assessing Officer believed there was an escapement of income due to investment in unsold properties. However, it was argued that the return of income was filed by the assessee, and the finding of escapement was for a different assessment year. The Tribunal held that the Assessing Officer was not justified in reopening the assessments for the relevant years.

Justification for escapement of income: The Assessing Officer contended that even if no addition was made on account of unexplained investment, the belief of escapement of income at the time of issuing notices was justified. However, the Tribunal found that the basic finding that the return of income was not filed was factually incorrect, and the reasons for reopening did not specifically relate to the relevant assessment years. Consequently, the Tribunal quashed the notices and assessment orders for the respective years.

Disallowance of expenses: The assessee challenged the disallowance of 20% of various expenses, arguing that they were incidental to the business activity and should not be disallowed on an ad hoc basis. The Tribunal, after considering the arguments and facts, reduced the disallowance to 10%.

In conclusion, the Tribunal allowed some appeals and partly allowed others, based on the issues of reopening assessments under Section 147, justification for escapement of income, and the disallowance of expenses.