2015 (12) TMI 557 - AT - Income Tax

Reopening of assessment - Held that - Where no return has been filed by an assessee and the AO wants to invoke jurisdiction vested upon him u/s.147 of the Act, the reasons mentioned by the AO for reopening should show a logical thought process which would show how he came to a conclusion that the total income of the such person exceeded the maximum amount which was not chargeable to tax. Now if we have a look at the reasons recorded by the AO in the case before us, what is mentioned is that he wanted to verify the source of income for the advance of ₹ 10.77 lakhs given by the assessee to her husband. There is nothing here whatsoever mentioned regarding any lacunae in the confirmation filed by the assessee in the course of her husband s assessment proceedings or regarding any investigation done by the AO that could bring out something which would show an escapement of income. Argument of the Ld. DR is that in a case where assessee has not filed a return at all, the reasons that are to be given for reopening should not be seen with the same eyes as in the case of an assessee who had filed a return of income earlier. Even if we accept this contention, reasons given by the Ld. AO for issue of notice u/s.148 of the Act, does not give even a hint of any escapement of income or tax. As for the reliance placed by the CIT (A) on the Hon ble Apex Court judgment in the case of GKN Driveshafts (2002 (11) TMI 7 - SUPREME Court) question there was whether reasons had to be furnished to an assessee and his reply disposed off, before concluding the assessment. In our opinion this case will not support the case of the Revenue here. In the circumstances of the case we are convinced that reopening was resorted only on suspicions and the test of relevancy is not satisfied. Ex-consequenti we hold the reassessment invalid. - Decided in favour of assessee.

Summary

Issues:
1. Validity of reopening assessment for the impugned assessment year.

Analysis:
The appeal raised seven grounds, with grounds 1, 5, and 7 being general and not needing specific adjudication. Ground 6 concerned the levy of interest under section 234C of the Income-tax Act, 1961, which was considered consequential and did not require specific adjudication. Ground 2 challenged the reopening of the assessment by the Assessing Officer (AO) for the impugned assessment year. The AO had found discrepancies in the loan amount shown by the assessee's husband, leading to the notice under section 148 of the Act being served on the assessee. The reasons for reopening were related to verifying the source of income for the loan given by the assessee to her husband. The assessee contended that the reopening was based on suspicion and not on a reason to believe that income had escaped assessment.

The CIT (A) had upheld the validity of the reopening based on the AO's reasons and the decision in the case of GKN Driveshafts (India) Ltd v. ITO. However, the assessee argued that the reopening was unfounded and relied on the judgment in the case of C. M. Mahadeva v. CIT. The dispute revolved around whether the reopening was justified based on the available information and whether the assessee's agricultural income was adequately considered in the assessment.

The Tribunal analyzed the legal provisions regarding reopening assessments when no return of income had been filed. The Tribunal noted that the reasons provided by the AO for reopening did not establish any income escapement or tax liability. The AO's decision to issue a notice under section 148 was deemed invalid as it was solely based on suspicions and lacked concrete evidence of income evasion. The Tribunal emphasized the importance of logical reasoning behind reopening assessments, especially in cases where no return of income had been filed.

The Tribunal concluded that the reopening was not justified and held the reassessment to be invalid. As a result, the appeal of the assessee was allowed, and the grounds related to the merits of the addition were not adjudicated.

In summary, the Tribunal's detailed analysis focused on the validity of the reopening of the assessment for the impugned assessment year. The decision highlighted the importance of establishing concrete reasons for reopening assessments, especially in cases where no return of income had been filed. The Tribunal found the reassessment to be invalid as it was based on suspicions rather than evidence of income escapement, leading to the allowance of the assessee's appeal.