2018 (5) TMI 633 - AT - Income Tax

Validity of reopening of assessment - non specification of reasons to believe - Held that - As examine the documents placed before us namely reasons recorded, objections raised by the assessee and the order of the Department disposing of those objections, we do not find any direct nexus which is brought on record by the Department that on these factors the Assessing Officer believes or Assessing Officer necessitates that there is an income escaping assessment. Most of the wordings in the order disposing of objections of the assessee regarding reasons recorded seems to be arbitrarily worded without any specific finding or basis or even reader of that particular order cannot find a direct link as to why Department has reason to believe that income has escaped assessment so far as assessee is concerned. The objections of the assessee stating that certain wrong facts are recorded that is also not categorically rebutted by the Department. - Decided in favour of assessee.

Summary

Issues: Validity of reasons recorded for initiation of proceedings under section 147/148 and legality of re-assessment order.

Analysis:
1. The appeal was filed by the assessee against the order passed by the ld. CIT(A)-II, Kanpur, dated 10/11/2014. The assessee raised multiple grounds of appeal and also submitted additional grounds, citing the National Thermal Power Co. Ltd. vs. CIT case to support the admissibility of these additional grounds without factual verification.
2. The Tribunal admitted the additional grounds as they were deemed to be legal in nature and crucial to the matter at hand. The assessee contended that the Assessing Officer's reasons for reopening the assessment under section 147/148 were mechanical, vague, and based on nonexhaustive facts.
3. The Tribunal examined the reasons recorded by the Assessing Officer for initiating proceedings under section 147/148, which were related to the sale of a property by the assessee. The assessee objected to these reasons, stating that they were not based on relevant or credible information, as the sale consideration mentioned did not align with the actual facts of the property transaction.
4. The Tribunal considered the objections raised by the assessee and the response from the Department, which failed to provide specific details or evidence supporting the reasons recorded for reopening the assessment. The Tribunal emphasized the importance of credible and relevant information in forming a belief for reopening an assessment.
5. Referring to legal precedents, including the judgment of the Hon'ble Bombay High Court and the Supreme Court, the Tribunal highlighted the necessity of a rational connection between the material available to the Assessing Officer and the belief that income had escaped assessment. The Tribunal found that the reasons recorded lacked a direct nexus or link to support the belief of income escapement.
6. After thorough examination of the case records and legal principles, the Tribunal concluded that the reasons recorded for initiating proceedings under section 147/148 were arbitrary and legally flawed. Consequently, the re-assessment order was deemed illegal and void ab initio, leading to the quashing of the order passed by the ld. CIT(A) and the re-assessment proceedings.
7. The Tribunal ruled in favor of the assessee, declaring the appeal allowed. As the legal issue was decided in favor of the assessee, all other grounds raised in the appeal were considered moot. The order was pronounced in open court on 07/05/2018.