2021 (4) TMI 714 - AT - Income Tax

Reopening of assessment u/s 147 - ITO, Ward-2(2) jurisdiction under the provisions of section 127 to issue notice - assessee may not have accounted for the income earned from derivative transactions - HELD THAT - The only reason mentioned was that it appears that the assessee may not have accounted for the income earned from derivative transactions whereas the assessee replied that the said income was duly accounted for in the return of income. But without application of mind and without considering this reply, the ACIT, Circle-2 transferred the case to the ITO, Ward-2(2) for framing of reassessment. In this case, neither the Officer framing the assessment himself has formed the view that the income of the assessee has escaped assessment nor the Officer who had recorded reasons applied his mind to the submissions of the assessee that there was no escapement of income on the issue raised by the ACIT, Circle-2. Moreover, the case has been transferred by the ACIT, Circle-2 himself for which he did not have the jurisdiction under the provisions of section 127 of the Act. So, in this case, the ITO, Ward-2(2) had no jurisdiction to continue with the assessment which was transferred by the ACIT, Circle-2, rather, as per the provisions of the Act, the ITO, Ward-2(2) if wanted to make reassessment of the assessment, he himself should have formed the belief of the escapement of income or in the alternative, the case might have been transferred to him by the order of the Commissioner as per the provisions of the Act. Therefore, the reassessment framed in this case is bad in law and the same is hereby quashed - Decided in favour of assessee.

Summary

Issues:
Validity of reopening of assessment u/s. 148 of the Income Tax Act.

Analysis:
The appeals were filed against two separate orders of the Commissioner of Income Tax (Appeals) contesting the additions made by the Assessing Officer in reassessment under section 147 r.w. section 148 of the Act. The common ground in both appeals was the validity of the reopening of the assessment u/s. 148. The Counsel for the assessee requested to hear this common issue first, which was not objected to by the DR. The notice for reopening was issued by the ACIT, Circle-2, but the assessment order was passed by the ITO, Ward-2(2). The Counsel argued that the ACIT did not have jurisdiction to issue the notice and transfer the case to ITO. The reasons for reopening were based on alleged undisclosed profits from commodity market transactions, which the assessee claimed were included in the return. The DR argued that the ACIT had jurisdiction due to pecuniary reasons and that the assessee did not object within the specified time. However, the Tribunal found that the ACIT did not have the authority to transfer the case to ITO, and the reassessment was based on insufficient application of mind. The Tribunal concluded that the reassessment was bad in law and quashed it, allowing both appeals of the assessee.

In conclusion, the Tribunal held that the reassessment orders were quashed as the ACIT did not have the authority to transfer the case to ITO, and there was a lack of proper application of mind in forming the belief of escapement of income. The reassessment was deemed bad in law, leading to the allowance of both appeals by the assessee.