2015 (4) TMI 1103 - HC - Income Tax

Reopening of assessment - Held that - Once it is found that none of the reasons recorded by the Assessing Officer for initiating proceedings under section 147 was germane to initiation of such proceedings then it has to be held that he had no reason to believe that any income had escaped assessment and therefore any further proceeding would be without jurisdiction. - Decided in favour of assessee

Summary

Issues:
Reopening of assessment under section 147 of the Income-tax Act, 1961 based on reasons recorded by the Assessing Officer.

Analysis:
The case involved two appeals arising from a common order passed by the Income-tax Appellate Tribunal, Patna Bench, dismissing the appeal of the Revenue. The matter pertained to the reopening of the assessment of the assessee under section 147 of the Income-tax Act, 1961. The Assessing Officer issued a notice under section 147 to the assessee based on recorded reasons. The assessment made by the Assessing Officer included findings related to escaped assessment regarding the cost of construction based on the report of the DVO. However, no adverse findings were made on the reasons recorded for initiating proceedings under section 147. The Tribunal accepted the contention of the assessee that the Assessing Officer lacked jurisdiction if the reasons to believe were not valid, as per the provisions of section 147 of the Income-tax Act.

The Tribunal's decision was based on the interpretation of section 147 and Explanation 3 of the Act. It was noted that the power to assess or reassess any escaped assessment could be exercised not only based on the reasons recorded under section 148(2) but also on additional grounds. Before issuing a notice under section 147, the Assessing Officer is mandated to record reasons for doing so. The Tribunal referred to a decision of the Rajasthan High Court emphasizing the importance of the phrase "such income" and "any other income chargeable to tax" in determining the jurisdiction of the Assessing Officer under section 147.

The Court agreed with the Rajasthan High Court's decision, stating that if the reasons recorded by the Assessing Officer were not relevant to the initiation of proceedings under section 147, then it must be concluded that he had no valid reason to believe that any income had escaped assessment. Therefore, any further proceedings would lack jurisdiction. The Tribunal's findings were deemed unassailable, leading to the dismissal of the appeals as no substantial question of law arose.

In conclusion, the judgment highlighted the significance of valid reasons to believe in initiating proceedings under section 147 of the Income-tax Act and emphasized that any assessment or reassessment must be based on grounds relevant to the escaped income. The decision underscored the necessity for the Assessing Officer to adhere to the statutory requirements before exercising jurisdiction under section 147.