2025 (5) TMI 1087 - AT - Income Tax

Bogus and fictitious expenses - CIT(A) deleted addition holding that this would amount to double taxation of same amount as this amount was considered in assessment made u/s. 143(3) - HELD THAT - No material has been placed on record by the Revenue to controvert the findings of the First Appellate Authority. On the contrary DR has pointed that in assessment made u/s. 143(3) of the Act the AO denied assessee s claim of LTCG and brought gains to tax as business income. The said addition was deleted by the CIT(A) and the order of CIT(A) was upheld by the Tribunal. This itself shows that the issue was considered by the Tribunal in assessment proceedings u/s. 143(3) of the Act and had rejected contention of the Revenue. We find no reason to interfere with the findings of the CIT(A) on this issue. Hence ground no. 1 of appeal is dismissed. Addition on account of loss on sale of shares - CIT(A) deleted Addition stating that the issue was considered by the AO in original assessment made u/s. 143(3) of - HELD THAT - The same issue cannot be agitated again in reassessment proceedings. The Revenue has admitted the fact that in original assessment proceedings the AO denied assessee s claim of LTCG and brought the gains of Rs. 1.54 crores to tax as business income. The said addition was deleted by the CIT(A) and the Department s appeal was dismissed by the Tribunal as well as the Hon ble High Court. We are of considered view that once the issue has been settled the same issue cannot be agitated again in reassessment proceedings. Thus Ground no. 2 of appeal is dismissed being devoid of any merit.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in the appeals arising from the assessment year 2012-13 are:

(a) Whether the deletion of addition of Rs. 8,48,89,345/- on account of alleged bogus and fictitious expenses related to construction/fixed cost of a hotel by the Commissioner of Income Tax (Appeals) (CIT(A)) was legally sustainable, or whether such deletion amounted to erroneous relief to the assessee.

(b) Whether the deletion of addition of Rs. 42,08,00,000/- on account of alleged bogus loss on sale of shares by the CIT(A) was justified, or whether the Revenue was entitled to treat such loss as inadmissible and make the addition.

(c) Whether the reopening of assessment under section 147 of the Income Tax Act, 1961 (the Act) was valid and sustainable, as challenged by the assessee in its appeal.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Deletion of addition of Rs. 8,48,89,345/- on account of bogus and fictitious expenses

Relevant legal framework and precedents: The reopening of assessment and additions thereto are governed by the provisions of the Income Tax Act, particularly sections 143(3) and 147. The principle against double taxation and issue estoppel in reassessment proceedings is well recognized, whereby an issue once adjudicated in assessment proceedings cannot be reopened without fresh material or change in circumstances.

Court's interpretation and reasoning: The CIT(A) deleted the addition of Rs. 8,48,89,345/- on the ground that it would amount to double taxation of the same amount, as the issue had already been considered and decided in the original assessment under section 143(3). The Tribunal noted that the Revenue failed to place any material to controvert the findings of the CIT(A). The Department's representative argued that the hotel was under bank possession and auctioned in June 2011, thus negating the possibility of construction or fixed costs in the financial year 2011-12. However, the Tribunal observed that this contention was already rejected in the original assessment and subsequent appeals, including before the Tribunal.

Key evidence and findings: The assessment order under section 143(3) had denied the assessee's claim of long-term capital gains and treated gains as business income, and the additions relating to construction costs were considered therein. The CIT(A) and the Tribunal had upheld deletion of additions on this issue previously.

Application of law to facts: The Tribunal applied the principle that once an issue has been adjudicated and settled in assessment proceedings, it cannot be reopened in reassessment without fresh material. Since no new material was brought forward by the Revenue to justify reopening this issue, the deletion stood justified.

Treatment of competing arguments: The Revenue's reliance on the physical status of the hotel and auction proceedings was found insufficient to overturn the prior adjudication. The assessee's defense that the addition was already considered and deleted was accepted.

Conclusion: The Tribunal dismissed the Revenue's ground challenging deletion of Rs. 8,48,89,345/- addition, upholding the CIT(A)'s order.

Issue (b): Deletion of addition of Rs. 42,08,00,000/- on account of alleged bogus loss on sale of shares

Relevant legal framework and precedents: The treatment of capital gains and losses, and the scope of reassessment proceedings under section 147, are central. The principle against re-agitating settled issues in reassessment proceedings applies. Judicial precedents emphasize finality and bar reopening of issues once decided unless new material emerges.

Court's interpretation and reasoning: The CIT(A) deleted the addition of Rs. 42.08 crores stating that the issue was already considered by the AO in the original assessment under section 143(3), and the same issue cannot be agitated again in reassessment proceedings. The Tribunal noted that the Revenue admitted the AO had denied the assessee's claim of long-term capital gains and brought gains of Rs. 154.29 crores to tax as business income. The CIT(A)'s deletion of the addition was upheld by the Tribunal and the High Court in earlier appeals.

Key evidence and findings: The original assessment order did not mention the loss claim of Rs. 66.09 crores. The AO treated gains as business income and denied the long-term capital gain claim. The CIT(A) deleted the addition, and the Revenue's appeals were dismissed at higher forums.

Application of law to facts: The Tribunal applied the doctrine of finality in tax proceedings, holding that issues conclusively decided cannot be reopened in reassessment without fresh material. Since the issue had been finally adjudicated, the reassessment addition was invalid.

Treatment of competing arguments: The Revenue's contention that the loss on sale of shares was bogus and should be added back was rejected due to absence of fresh material and prior adjudication. The assessee's argument that the issue was settled was accepted.

Conclusion: The Tribunal dismissed the Revenue's ground challenging deletion of Rs. 42.08 crore addition, affirming the CIT(A)'s order.

Issue (c): Validity of reopening of assessment under section 147

Relevant legal framework and precedents: Section 147 of the Income Tax Act allows reopening of assessment if the Assessing Officer has reason to believe that income has escaped assessment. However, reopening must be based on tangible material and not mere change of opinion. Jurisprudence mandates strict compliance with procedural safeguards to protect against arbitrary reopening.

Court's interpretation and reasoning: The assessee challenged the validity of reopening of assessment. However, the assessee's counsel stated that if the additions challenged by the Revenue were dismissed, the assessee would not press the issue of reopening. Since the Tribunal dismissed the Revenue's appeal on merits, the assessee's appeal on reopening was dismissed as not pressed.

Key evidence and findings: No independent examination of the reopening validity was undertaken since the assessee did not press the ground following dismissal of Revenue's appeal.

Application of law to facts: The Tribunal did not find it necessary to adjudicate on reopening validity in absence of contest by the assessee.

Treatment of competing arguments: The assessee's strategic decision not to press the reopening ground was accepted.

Conclusion: The assessee's appeal on reopening was dismissed.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"No material has been placed on record by the Revenue to controvert the findings of the First Appellate Authority. On the contrary, the Department's appeal was dismissed by the Tribunal and the Hon'ble High Court. This itself shows that the issue was considered by the Tribunal in assessment proceedings u/s. 143(3) of the Act and had rejected contention of the Revenue. We find no reason to interfere with the findings of the CIT(A) on this issue."

"Once the issue has been settled, the same issue cannot be agitated again in reassessment proceedings."

Core principles established include the doctrine of finality in tax proceedings, the bar on double taxation, and the requirement of fresh material to justify reassessment under section 147. The Tribunal reaffirmed that issues conclusively decided in original assessment and appellate proceedings cannot be reopened in reassessment without new evidence or circumstances.

Final determinations:

(i) The deletion of addition of Rs. 8,48,89,345/- on account of bogus and fictitious expenses was upheld.

(ii) The deletion of addition of Rs. 42,08,00,000/- on account of loss on sale of shares was upheld.

(iii) The reopening of assessment was not adjudicated on merits but the assessee's appeal on this ground was dismissed as not pressed.

Accordingly, both the Revenue's and the assessee's appeals were dismissed.

← Previous Next →