2018 (11) TMI 325 - AT - Income Tax

Reopening of assessment u/s 147 - Addition under the head undisclosed income - short term capital gain addition - Assessing Officer has mentioned that the assessee is not assessed to tax - Held that - AO s conclusion are factually incorrect as Exhibit 1 shows that the assessee has filed return of income on 29.09.2010 electronically. Exhibit 12 is a letter issued by the ITO, Ward 1(2), Noida asking the assessee to furnish details in respect of purchase of immovable property stating that the assessee has purchased the said property without quoting PAN. Exhibit 13 is the reply filed by the assessee explaining the financial transactions. Exhibit 16 is another notice by the ITO, Ward 1(2) asking the assessee to furnish information in respect of financial transactions. Surprisingly, this notice contains PAN of the assessee. In the earlier notice, as mentioned elsewhere, the same ITO observed that the assessee has entered into transaction without quoting PAN. Exhibit 17 is the reply filed by the assessee. Exhibit 18 is again a notice by the same ITO asking the assessee to once again furnish information regarding financial transactions. Exhibit 19 is the reply filed by the assessee. All these facts when considered with reasons recorded for reopening of the assessment would lead to only one conclusion that the reasons recorded for reopening the assessment are devoid of any application of mind. In our considered opinion, such reopening cannot be upheld. - Decided in favour of assessee

Summary

Issues involved:
1. Non-speaking order by CIT (A) and upholding of additions by AO without adjudication of grounds
2. Additional ground of appeal challenging the initiation of proceedings under section 147 of the Act
3. Reopening of assessment under section 147 based on AIR information
4. Application of mind by Assessing Officer before issuing notice under section 148

Issue 1: Non-speaking order by CIT (A) and upholding of additions by AO without adjudication of grounds:
The assessee raised multiple grounds of appeal before the CIT (A), challenging the additions made by the Assessing Officer (AO) under different heads. The CIT (A) was criticized for not adjudicating all the grounds and passing a non-speaking order, which was considered against the law. The specific additions of ?14,50,000 under undisclosed income, ?45,36,000 under short-term capital gain, and ?36,84,000 under section 50C of the Income Tax Act were contested by the assessee. The CIT (A) was faulted for upholding these additions without proper discussion or reasoning, leading to the appeal being preferred before the Appellate Tribunal.

Issue 2: Additional ground of appeal challenging the initiation of proceedings under section 147 of the Act:
During the proceedings before the Appellate Tribunal, the assessee sought to raise an additional ground challenging the initiation of proceedings under section 147 of the Act. The assessee argued that the assessment was bad in law and on facts as the statutory pre-conditions for reopening the assessment were not satisfied. The Tribunal admitted this additional ground, emphasizing its significance as it pertained to the fundamental validity of the assessment process.

Issue 3: Reopening of assessment under section 147 based on AIR information:
The reasons for reopening the assessment were based on information received under the Annual Information Return (AIR) regarding the sale/purchase of an immovable property by the assessee. The Assessing Officer alleged that the assessee had not responded to the issued letter and was not assessed to tax. However, discrepancies were found in the AO's assertion as the assessee had indeed filed a return of income electronically. The Tribunal observed that the reasons recorded for reopening the assessment lacked proper application of mind, rendering the reopening invalid and leading to the quashing of the assessment order.

Issue 4: Application of mind by Assessing Officer before issuing notice under section 148:
The critical question examined by the Tribunal was whether the Assessing Officer had applied his mind before issuing the notice under section 148 of the Act. Upon scrutiny of the facts, it was revealed that the AO's assertion that the assessee was not assessed to tax was factually incorrect, as evidenced by the filed return of income. The series of notices issued by the AO and the responses provided by the assessee further highlighted the lack of proper application of mind in the reopening process. Consequently, the Tribunal quashed the notice under section 148, thereby annulling the assessment order and avoiding a detailed examination of the case's merits.

In conclusion, the Appellate Tribunal allowed the appeal of the assessee, emphasizing the importance of proper application of mind by the Assessing Officer in reopening assessments and the necessity for reasoned orders by the CIT (A) when upholding additions made by the AO. The judgment highlighted the need for adherence to statutory pre-conditions in assessment proceedings to ensure the validity and legality of tax assessments.