2012 (7) TMI 160 - AT - Income Tax

Re-assessment proceedings - capital gain arising out of sale of agriculture land value of land as on 01.04.1981 was higher than the consideration amount - no return of income was filed being the income not liable for income-tax Held that - AO merely received information from ITO 6(3), Jhansi that the assessee has sold the land on 05.08.2003 at the higher rate as against Government value. The AO has not verified the information - Assessing Officer had not examined the information received from the survey circle before recording his own satisfaction of escaped income and initiating reassessment proceedings - Assessing Officer had thus acted only on the basis of suspicion and it could not be said that it was based on belief that the income chargeable to tax had escaped income - Assessing Officer had to act on the basis of reasons to believe and not on reasons to suspect - Assessing Officer had failed to incorporate the material and his satisfaction for reopening the assessment and therefore the issuance of notice under section 148 of the Act for reassessment proceedings was not valid - appeal of the assessee is allowed

Summary

Issues:
Reopening of assessment under section 147 of the Income Tax Act based on reasons recorded by the Assessing Officer.

Analysis:
The appeal was against the order of the ld. CIT(A)-II, Agra for the assessment year 2004-05. The appellant challenged the reassessment proceedings and addition on merits before the ld. CIT(A), arguing that the reasons recorded for reopening of assessment were without date and lacked conclusive proof of income escaping assessment. The ld. CIT(A) upheld the reassessment proceedings under section 148 of the IT Act, citing the need for the Assessing Officer to have a reason to believe that income assessable to tax has escaped assessment. The appellant reiterated that the ingredients of section 147 were not satisfied, while the ld. DR relied on the lower authorities' orders.

Upon considering the submissions and material on record, it was observed that the reasons for reopening of assessment did not meet the requirement of section 147 of the IT Act. The Assessing Officer had not verified the information received before recording the reasons, acting solely on suspicion rather than a belief that income had escaped assessment. The AO's actions were deemed hasty, lacking the necessary satisfaction for initiating proceedings. Citing legal precedents, it was emphasized that the Assessing Officer must have a genuine reason to believe, not merely suspect, that income has escaped assessment.

Referring to relevant case laws, including judgments by the Hon'ble Supreme Court and High Courts, the Tribunal concluded that the AO's actions were not based on valid reasons to believe income had escaped assessment. Consequently, the reassessment proceedings were quashed, leading to the deletion of all additions. The appeal of the assessee was allowed, and the orders of the lower authorities were set aside.

In conclusion, the Tribunal found that the AO had not correctly assumed jurisdiction under section 147/148 of the IT Act due to insufficient grounds for reopening the assessment. As a result, the reassessment proceedings were deemed invalid, leading to the allowance of the assessee's appeal and the deletion of all additions made during the reassessment.

This comprehensive analysis highlights the critical legal aspects of the judgment, focusing on the validity of the reasons for reopening the assessment and the necessity for the Assessing Officer to have a genuine reason to believe that income has escaped assessment under section 147 of the Income Tax Act.