2017 (1) TMI 1400 - AT - Income Tax

Validity of reopening of assessment - reasons to believe - unexplained investment - AIR communication relied upon - Held that - A perusal of the reasons extracted would indicate that the ld. AO has basically not made reference to any material possessed by him except the AIR communicated to him. It is pertinent to observe that he has not analysed the information in right perspective and he sought to reopen by conceiving a fact that the assessee failed to respond to the query raised about this investment. As noticed in the submissions of the assessee, there was no proceedings pending before the AO when he sought the clarification of the assessee vide alleged query notice dated 23rd January, 2012. It is to be seen that in the reasons the AO has nowhere alleged escapement of income. The thrust of the reasoning would show that he want to make an enquiry about the investment. No doubt, for reopening of an assessment, he has to just form a prima facie opinion and not to arrive at a firm conclusion, but, the formation of a prima facie opinion should also depict escapement of income. It is also pertinent to observe that when all these pleas were raised before the first appellate authority, then, the ld. first appellate authority has not dealt with a single proposition and rather dealt with the issue in an altogether different manner whether notice u/s 148 was served or not, copy of reasoning was provided or not, the procedure contemplated through the decision of the Hon ble Supreme Court in the case of GKN Driveshaft 2002 (11) TMI 7 - SUPREME Court was followed or not. Thus AO is not justified in reopening of the assessment afresh.- Decided against revenue

Summary

Issues Involved:
1. Reopening of assessment.
2. Addition on account of payment for purchase of agricultural land.
3. Addition treating agricultural income as income from undisclosed sources.

Issue-wise Detailed Analysis:

1. Reopening of Assessment:
The primary issue was whether the reopening of the assessment was justified. The AO received information from the Annual Information Report (AIR) Wing indicating that the assessee had made an investment of ?55,55,000 for purchasing immovable property. The AO believed that income to this extent had escaped assessment and recorded reasons for reopening the assessment. The assessee challenged this reopening, arguing that there was no pending assessment proceeding at the time the AO sought clarification about the investment. The Tribunal noted that the AO's reasons for reopening were based solely on the AIR information and that the AO had not properly analyzed this information. The Tribunal also referenced the ITAT Amritsar Bench's decision, which stated that the Income-tax Act does not authorize an AO to conduct an enquiry without pending assessment proceedings. Consequently, the Tribunal concluded that the reopening of the assessment was not justified and quashed the assessment.

2. Addition on Account of Payment for Purchase of Agricultural Land:
The AO added ?27,77,500, equivalent to half of the alleged investment in agricultural land, to the assessee's income. The assessee contended that the investment was made from disclosed sources and provided bank statements and other documents to support this claim. However, since the Tribunal quashed the reopening of the assessment, it deemed it unnecessary to address this ground of appeal, rendering it infructuous.

3. Addition Treating Agricultural Income as Income from Undisclosed Sources:
The AO added ?44,500 to the assessee's income, treating it as income from undisclosed sources instead of agricultural income. The assessee argued that this amount was indeed agricultural income and provided relevant documents to support this claim. Similar to the second issue, the Tribunal did not address this ground of appeal due to the quashing of the reopening of the assessment.

Conclusion:
The Tribunal allowed the appeals of the assessee, quashing the reassessment made by the AO on the grounds that the reopening of the assessment was not justified. The Tribunal emphasized that the AO must have a prima facie belief of income escapement based on material evidence, which was not adequately demonstrated in this case. As a result, the other grounds of appeal became infructuous and were not addressed. The order was pronounced in the open court on 06.01.2017.