2021 (8) TMI 1156 - AT - Income Tax

Reopening of assessment u/s 147 - eligibility of reasons to believe - HELD THAT - AO has failed to discharge the obligation cast upon him by the Statute by verifying the correctness of the information before initiating the proceedings. Before issuing a notice u/s 148 of the Act, the ITO must have either reasons to believe that by reason of the omission or failure on the part of assessee to make a return for any assessment year to the Income tax Officer or to disclose fully or truly all material facts necessary for assessment for that year, income chargeable to tax has escaped assessment for that year or alternatively notwithstanding that there has been no omission or failure as mentioned above on the part of assessee, the ITO has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. The records regarding filing of ITR is accessible on line as refund granted to the assessee for the assessment year under review, without information of ITR filed by him clearly indicated in Form No. 26AS, copy of which is enclosed, had the A.O. taken due care to verify the facts before reaching to the above reasons, there could have been not valid reasons for reopening the case u/s 147/148 - unless the requirement of clause (a) and (b) of Section 147 are satisfied, the ITO has no jurisdiction to issue a notice u/s 148 - The important safeguard provided in Sections 147 and 151 of the Act were lightly treated by the A.O. as well as by the Commissioner. Both of them appear to have taken the duty imposed on them under those provisions as of little importance. They have substituted the form for the substance. - Proceedings u/s 147 of the Act stands quashed and resultantly, the demand of tax stands deleted - Decided in favour of assessee.

Summary

Issues:
Initiation of reassessment proceedings under Section 147/148 of the Income Tax Act, 1961 without proper verification and application of mind by the assessing officer.

Detailed Analysis:

Initiation of Reassessment Proceedings:
The appeal was filed against the order of the ld. CIT(A)-I, Jaipur for the A.Y. 2008-09. The appellant contended that the reassessment proceedings were initiated without proper application of mind by the assessing officer. The appellant argued that the reasons recorded for reopening the assessment were factually incorrect and ill-founded. The appellant had filed the Income Tax Return on time, obtained the Tax Audit Report, and the return was processed with a refund granted, as confirmed by Form 26AS. The appellant emphasized that reassessment based on incorrect reasons renders the proceedings invalid ab initio. The ITAT admitted the additional grounds raised by the appellant for adjudication, considering them as legal grounds requiring thorough discussion on merits.

Verification and Jurisdiction of the Assessing Officer:
The assessing officer failed to verify the correctness of information before initiating the reassessment proceedings. Despite the appellant having filed the ITR on time and fulfilling all requirements, the proceedings were initiated on the basis that the ITR was not filed. The ITAT highlighted that the assessing officer must have valid reasons to believe that income has escaped assessment before issuing a notice under Section 148. The failure to verify facts before initiating proceedings rendered the entire process illegal. The ITAT emphasized that the jurisdiction of the assessing officer to issue a notice under Section 148 hinges on satisfying the requirements of the statute, and the failure to do so renders the proceedings invalid. The ITAT set aside the orders of the assessing officer and the ld. CIT(A), quashing the reassessment proceedings under Section 147 of the Act and deleting the tax demand.

Conclusion:
The ITAT allowed the appeal of the assessee, emphasizing the importance of proper verification and application of mind by the assessing officer before initiating reassessment proceedings. The judgment highlighted the necessity for the assessing officer to adhere to statutory requirements and ensure the validity of reasons before issuing notices under Section 148 of the Income Tax Act. The decision underscored the significance of upholding procedural safeguards and the jurisdictional prerequisites for reassessment proceedings to maintain the integrity and legality of tax assessments.