The revenue is in appeal questioning the correctness and legality of the order passed by the Income Tax Appellate Tribunal, Bangalore Bench in ITA No.1122/Bang/2008 dated 31.03.2009 whereunder order passed by the CIT (Appeals) dated 04.06.2008 reversing the order of assessment dated 21.07.2006 passed under Section 143(3) r/w Section 147 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’ for brevity) which was pursuant to the notice issued under Section 148 of the Act for reopening the assessment concluded on 29.10.2004.

2. The above appeal has been admitted to consider the following substantial questions of law by order dated 30.11.2010.

“1) Whether the Appellate Authorities were correct in holding that reopening of assessment based on information that two Horses Tuscan and Brave Act were purchased at Rs. 1,38,729/- and Rs. 10,09,641/- was actually Rs. 5,32,784/- and Rs. 2,16,96,697/- respectively as detected by Directorate of Revenue Intelligence and customs duty of Rs. 1,87,540/- and Rs. 58,54,471.68 having been paid cannot be treated as information for the purpose of reopening assessment and bringing the same to tax, in view of the judgment of the Apex Court in Coca Cola Export Corporation 231 ITR 200?

2) Whether the Appellate Authorities have failed to take into consideration that the order passed by the Settlement Commission, which had quantified the customs duty based on the detection made by the Revenue Intelligence and the value of Horses would clearly show that income liable to tax had escaped assessment?

3. Facts in brief which has led to the filing of this appeal are as under:

For the assessment year 200304 the assessee filed return of income declaring loss of Rs. 3,49,80,579/and assessment came to be concluded on 29.10.2004 determining the loss at Rs. 2,34,80,483/. Notice under Section 148 of the Act came to be issued to the assessee on 12.05.2005 and in response to the same, return of income was filed on 09.06.2005 declaring the loss of Rs. 2,34,80,483/. Thereafter, assessment came to be concluded on 21.07.2006 making additions in regard to investments on the ground that such investments were made outside the books and out of undisclosed sources.

4. The assessing Officer had issued notice under Section 148 of the Act to reopen the assessment concluded on 29.10.2004 on the ground that he was in receipt of information that the Directorate of Revenue Intelligence has established that undisclosed payments had been made by the assessee towards purchase of Horses and as such, the concluded assessment came to be reopened and assessment order came to be passed under Section 147 of the Act. Being aggrieved by this order, appeal came to be filed by the assessee before CIT (Appeals), who by order dated 04.06.2008 allowed the appeal on the ground that the issue was concluded in favour of the assessee for the assessment year 199899 by the Tribunal holding that alleged violation of Customs law could not lead to the formation of opinion that the assessee has not disclosed his true and correct income and that income chargeable to tax has escaped assessment by relying upon the judgment of Hon’ble Apex court in the case of COCO COLA EXPORT CORPORATION ETC. vs. INCOME TAX OFFICER AND ANOTHER reported in (1998) 231 ITR 200 (SC).

5. Revenue pursued the matter before the Tribunal by filing an appeal and the appellate Tribunal as already noticed hereinabove, affirmed the order of the CIT (Appeals) by reiterating its order dated 02.05.2008 passed in ITA No.816/Bang/2006 in respect of the same assessee which related to the assessment year 1998-99. Hence this appeal under Section 260A of the Act by the Revenue.

6. We have heard the arguments of learned Advocates appearing for the parties namely, Sri K.V. Aravind for the revenue and Smt. S.R. Anuradha appearing for the assessee.

7. It is the contention of Sri K.V. Aravind, learned Advocate appearing for Revenue that both the appellate authorities committed an error in holdin