2018 (7) TMI 231 - AT - Income Tax

Reopening of assessment - reopening of case beyond 4 years - whether notice is being issued with the prior approval of the JCIT, Haridwar Range, Haridwar - approval in accordance of law - Held that - We find that there is no allegation in the reasons recorded that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment u/s 147 of the Act, the notice issued u/s. 148 of the Act after a period of four years from end of assessment year in case where assessment has been framed u/s. 147/143(3) of the Act is illegal and invalid. The reasons recorded are vague and non-speaking and reflect complete non-application of mind much less independent application of mind . The action of the AO has been taken mechanically on the basis of information of DCIT, Central Circle, Dehradun and, not on independent application of mind and therefore, on this count also the proceedings are without jurisdiction Both the authorities have not recorded proper satisfaction / approval, before issue of notice u/s. 148 of the I.T. Act. Thereafter, the AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the DCIT, Central Circle, Dehradun. We are of the considered view that proceedings initiated by invoking the provisions of section 147 of the Act by the AO and upheld by the Ld. CIT(A) are nonest in law and without jurisdiction, hence, the re-assessment is quashed. Since we have already quashed the re-assessment, the other grounds have become academic and are therefore not adjudicated and accordingly, the assessee s appeal is allowed.

Issues Involved:
1. Validity of proceedings initiated under Section 147 of the Income Tax Act.
2. Addition of ?95,25,000/- as undisclosed investment under Section 69B of the Act.
3. Alleged failure to provide sufficient opportunity, violating natural justice principles.
4. Levy of interest under Section 234B of the Act.

Detailed Analysis:

1. Validity of Proceedings Initiated Under Section 147 of the Income Tax Act:
The appellant challenged the initiation of proceedings under Section 147, arguing that there was no tangible, relevant, specific, and reliable material to justify the belief that income had escaped assessment. The appellant contended that the notice issued under Section 148 after four years from the end of the assessment year was illegal and invalid due to the absence of allegations of failure to disclose fully and truly all material facts necessary for assessment. The Tribunal noted the absence of any such allegation in the recorded reasons and found the reasons to be vague, non-speaking, and reflecting non-application of mind. The approval granted by the competent authority was deemed mechanical, as it merely stated "Yes, I am satisfied" without proper satisfaction or application of mind. The Tribunal concluded that the reopening of the case was bad in law and quashed the reassessment proceedings.

2. Addition of ?95,25,000/- as Undisclosed Investment Under Section 69B of the Act:
The appellant argued against the addition of ?95,25,000/-, representing alleged undisclosed investment, based on search and seizure operations. The appellant contended that the purchase consideration of ?15,50,000/- was the actual sum invested, supported by documentary evidence. The Tribunal found that the proceedings were initiated based on information from the Investigation Wing without independent application of mind by the Assessing Officer (AO). The Tribunal held that the reasons recorded did not constitute valid reasons to believe that income had escaped assessment. Consequently, the addition made under Section 69B was not sustainable.

3. Alleged Failure to Provide Sufficient Opportunity, Violating Natural Justice Principles:
The appellant claimed that the authorities framed the impugned order without granting sufficient opportunity, violating the principles of natural justice. The Tribunal did not specifically address this issue, as the reassessment proceedings were already quashed on other grounds.

4. Levy of Interest Under Section 234B of the Act:
The appellant challenged the levy of interest under Section 234B. However, the Tribunal did not specifically address this issue, as the reassessment proceedings were quashed, making the other grounds academic and not adjudicated.

Conclusion:
The Tribunal quashed the reassessment proceedings initiated under Section 147, finding them to be without jurisdiction and based on non-application of mind. The addition of ?95,25,000/- as undisclosed investment was also not sustained. Consequently, the appeal filed by the assessee was allowed.

← Previous Next →