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2019 (4) TMI 1114 - AT - Income TaxBest Judgement Assessment u/s 144 - Validity of AO s jurisdiction u/s. 144 - failure on the part of the assessee to file return of income u/s. 139 or not? - HELD THAT - Out of three preconditions for invoking the provisions of section 144, in the present case, none of these three conditions is existing because the assessee has filed the return of income as well as complied with the notice issued by the AO u/s. 142(1) - the only requirement of notice issued by the AO u/s. 142(1) on 13.01.2017 was this that assessee should attend along with the books of accounts on 24.01.2017 and this is not the case of the AO that the assessee has not appeared before him along with the books of accounts. In our considered opinion, in the facts of present case as discussed above, this judgment of MOHINI DEBI MALPANI 1969 (1) TMI 22 - CALCUTTA HIGH COURT is squarely applicable in which it was held that if the conditions precedent for the assumption of jurisdiction under Section 144 of the Act are not present, the order of assessment u/s. 144 must be struck down as being without jurisdiction. Thus the conditions precedent for the assumption of jurisdiction u/s. 144 were not present and therefore, the assessment order passed by the AO u/s. 144 of IT Act deserves to be struck down and we struck down the same in all these four years. Validity of reopening of assessment - combined reasons recorded for several years - HELD THAT - issue of combined notice u/s 148 for several years to the assessee cannot be equated with recording of combined reasons 148 for several years because, in reply to notice u/s 148, the assessee is required to make compliance within a prescribed time by filing return of income but by recording of reasons for reassessment, the action is to be taken by the AO only by issuing notice u/s 148 and no action is to be taken by the assessee at this stage. Once the notice is issued by the AO u/s 148 and the return is filed by the assessee, the assessee may obtain the copy of reasons recorded by the AO and thereafter, the assessee may raise objection against the reopening. At that stage, if the reasons for several years are identical and therefore recorded together, it has no impact on the action to be taken by the assessee and hence, in our considered opinion, this judgment cannot be stretched to hold that recording of combined reasons for more than one year renders the reassessment bad in law. This objection has no merit. No live link or nexus between information/material and formation of belief - HELD THAT - There is no specific mention of name of the assessee in any statement as noted by the AO himself in the order passed by him to dispose of the objections of the assessee, in our considered opinion, the facts noted by the AO in the reasons recorded by him can be reasons to have suspicion about the genuineness of these transactions but on the basis of these facts, a man of ordinary prudence will not have reasons to believe that income has escaped assessment because the live link between the material available with the AO and formation of belief is missing particularly when there is no mention of the material found in course of survey, if any and considering this admitted fact that it is observed by the AO himself in Para 2 on page 173 of the order passed by him to dispose of the objections of the assessee that there is no specific mention of name of the assessee in any statement. In the light of above discussion, in our considered opinion, this judgment of Hon ble apex court rendered in the case of ITO vs. Lakhmani Mewal Das 1976 (3) TMI 1 - SUPREME COURT is applicable in the present case and respectfully following the same, we hold the reopening is not valid in the facts of the present case. - Decided in favour of assessee. In view of our decision in favour of the assessee on both these technical aspects i.e. validity of the assessment order u/s 144 and validity of reopening of the assessment, we feel that decision on merit is not called for because it is of academic interest only. Hence, we do not decide the issue on merit.
Issues Involved:
1. Validity of reopening of assessment under Section 147. 2. Validity of assessment order passed under Section 144. 3. Merits of additions made under Sections 68 and 69C. 4. Levy of interest under Sections 234B and 234D. Detailed Analysis: 1. Validity of Reopening of Assessment under Section 147: The assessee contended that the reopening of the assessment was invalid as the notice under Section 148 and the subsequent proceedings were without jurisdiction and barred by law. The assessee argued that the reasons recorded for reopening were based on generalized information from the Directorate of Investigation, Kolkata, without specific evidence against the assessee. The Tribunal noted that the reasons recorded by the AO did not have a direct nexus or live link with the formation of the belief that income had escaped assessment. The AO's reasons were based on a general modus operandi of penny stock operators without specific mention of the assessee's involvement. The Tribunal held that the reopening was based on "reasons to suspect" rather than "reasons to believe," making the reopening invalid. 2. Validity of Assessment Order Passed under Section 144: The assessee argued that the assessment order under Section 144 was invalid as the preconditions for invoking Section 144 were not met. The Tribunal noted that the AO did not allege any failure on the part of the assessee to file the return of income under Section 139 or to comply with notices issued under Sections 142(1) or 143(2). The Tribunal found that the AO's decision to complete the assessment under Section 144 was based on the non-reliability of the assessee's books of accounts, which is not a valid ground for invoking Section 144. The Tribunal held that the conditions precedent for the assumption of jurisdiction under Section 144 were not present, and therefore, the assessment order under Section 144 was struck down. 3. Merits of Additions Made under Sections 68 and 69C: The Tribunal noted that since the assessment order under Section 144 and the reopening of the assessment were held invalid, the merits of the additions under Sections 68 and 69C became academic. However, the Tribunal briefly addressed the issue, noting that the AO's additions were based on circumstantial evidence and statements of third parties without providing the assessee an opportunity for cross-examination. The Tribunal emphasized the importance of natural justice and held that the additions were unsustainable. 4. Levy of Interest under Sections 234B and 234D: The assessee contested the levy of interest under Sections 234B and 234D, arguing that no opportunity was given before the levy. The Tribunal did not specifically address this issue in detail, as the primary grounds related to the validity of the assessment order and reopening were decided in favor of the assessee. Consequently, the levy of interest under Sections 234B and 234D was also set aside. Conclusion: The Tribunal allowed the appeals filed by the assessee, holding that both the assessment order under Section 144 and the reopening of the assessment were invalid. The Tribunal emphasized the importance of adhering to legal procedures and principles of natural justice in tax assessments.
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