2017 (12) TMI 865 - HC - Income Tax

Reopening of assessment - petitioner has not filed any return of income disclosing sale of the immovable property - Held that - The record of the case shows that earlier, pursuant to a notice under section 148 of the Act, the petitioner had, in fact, filed return on income disclosing the sale of such immovable property, and the Assessing Officer after duly applying his mind to the issue had accepted the return of income. Considering the fact that a return of income had been filed disclosing sale of the immovable property, the very foundation on which the reopening is based in the reasons recorded by the Assessing Officer for reopening the assessment, collapses. Therefore, on the reasons recorded, the Assessing Officer could not have formed the belief that income had escaped assessment, inasmuch as such belief had been formed on a factually incorrect premise. It is settled legal position, that the reopening of the assessment has to be maintainable on the reasons recorded for reopening the same, and that such reasons cannot be substituted. In the facts of the present case, when the original ground for reopening the assessment does not survive, the Assessing Officer seeks to proceed further with the assessment on totally different grounds, which is impermissible in law. - Decided in favour of assessee.

Summary

Issues:
1. Validity of notice issued under section 148 of the Income Tax Act, 1961 for reopening assessment year 2010-11.

Analysis:

1. The petitioner challenged a notice issued by the Income Tax Officer under section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the year 2010-11. The reasons for reopening the assessment were based on the petitioner not filing the return of income and a sale of immovable property valued at ?40,00,000 during the financial year 2009-10.

2. The petitioner had previously filed a return in response to a notice issued under section 148 of the Act in 2013, disclosing the income from the sale of the property. The assessment was duly completed under section 143(3) read with section 147 of the Act in 2015. The petitioner objected to the current notice, citing that the same grounds were already addressed in the previous assessment.

3. The petitioner argued that the Assessing Officer did not apply his mind correctly, as the reasons recorded for reopening the assessment were factually incorrect. Despite the petitioner providing evidence of filing the return and disclosing the income, the Assessing Officer proceeded with the reassessment based on erroneous grounds.

4. The court noted that the Assessing Officer's decision to reopen the assessment on the same grounds previously addressed was impermissible. It was established that the petitioner had filed a return disclosing the sale of the property, which the Assessing Officer had accepted after due consideration.

5. Referring to the legal precedent set in GKN Driveshafts (India) Ltd. v. ITO, the court emphasized the importance of the Assessing Officer providing reasons for reopening the assessment and the assessee's right to file objections. The court found that the Assessing Officer's actions in this case did not align with the legal requirements.

6. Ultimately, the court ruled in favor of the petitioner, quashing the notice issued under section 148 of the Act. The court held that the assumption of jurisdiction by the Assessing Officer for reopening the assessment was without legal authority and could not be sustained due to the factual inaccuracies and procedural irregularities in the reassessment process.