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2019 (2) TMI 983 - AT - Income TaxReopening of assessment - the assessee had not filed the return of income for the year or, for that matter, filed his return without disclosing the said income - Held that - No mention of the return in the reasons recorded, the same is not on the assessment record, with in fact the AO enquiring the assessee about it. Rather, the very fact that the Revenue justifies its action u/s. 148 on the basis of the assessee s return filed on 02.05.2016 brings out its relevance to the formation of belief as well as failure to disclose fully and truly all material facts necessary for assessment. The Revenue cannot, as explained in Vipin Khanna v. CIT 2000 (7) TMI 2 - PUNJAB AND HARYANA HIGH COURT , invoke section 148 to enable verification, for which the proper course is the recourse to notice u/s. 142(1); sec. 143(2) or, as the case may be, sec. 144. The reason/s recorded u/s. 148(2) on 18.03.2013 cannot be regarded as valid reason/s justifying the issue of notice u/s. 148(1) on 18.03.2013 which, therefore, cannot be regarded as valid notice in law. The impugned assessment is, accordingly, without jurisdiction. In this view of the matter, it is not necessary to travel to the other grounds, which are on the merits of the quantum additions.- Decided in favour of assessee.
Issues Involved:
1. Maintainability of the assessment without jurisdiction due to the absence of reasons to believe escapement of income. 2. Validity of the reasons recorded for reopening the assessment under Section 148 of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Maintainability of the Assessment Without Jurisdiction: The primary issue in this appeal is the maintainability of the assessment, which the assessee alleges is without jurisdiction due to the absence of a valid reason to believe that income had escaped assessment. The assessee was found to have sold seven properties as a General Power of Attorney holder. The Assessing Officer (AO) issued a notice under Section 148(1) based on the assumption that the assessee had not declared the short-term capital gains from these transactions in his return of income. The AO inferred this from the lack of response from the assessee, who was in jail at the time. 2. Validity of the Reasons Recorded for Reopening the Assessment: The reasons recorded by the AO for reopening the assessment were challenged on two main grounds: - The sale of immovable property on a General Power of Attorney basis could not give rise to any capital gain. - The AO recorded the reasons for reopening the assessment on 18.03.2013, even though the time allowed for the assessee to respond was until 20.03.2013. The AO justified the reopening based on the assessee's return of income filed on 02.05.2006, which did not disclose the capital gains. However, it was contended that the AO was unaware of the return at the time of recording the reasons on 18.03.2013. The AO's reasons for reopening the assessment were based on the assumption that the assessee had not declared the capital gains, which was not substantiated by the assessment records. The Tribunal examined the assessment records and found that the assessee's return was not part of the records at the time of recording the reasons. The AO's belief of income escapement was based on suspicion rather than concrete evidence. The Tribunal emphasized that a live, direct, and rational nexus between the reasons recorded and the belief of income escapement is essential, which was absent in this case. The Tribunal also noted that the AO's questioning of the assessee before the time allowed for response had lapsed was premature. The AO's reasons were based on anticipation rather than facts or legal inference. The Tribunal held that the reasons recorded on 18.03.2013 could not justify the issue of notice under Section 148(1), making the assessment without jurisdiction. Conclusion: The Tribunal concluded that the reasons recorded for reopening the assessment were not valid, and therefore, the notice issued under Section 148(1) was invalid. Consequently, the assessment was deemed without jurisdiction, and the assessee's appeal was allowed. The Tribunal did not address the other grounds related to the merits of the quantum additions, as the assessment itself was found to be without jurisdiction.
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