2022 (6) TMI 1099 - AT - Income Tax

Revision u/s 263 - Reassessment proceedings - What is the material before the AO which led him to believe escapement of income from tax due to non-returning of capital gain on the sale of land by the assessee/s during the relevant year in the instant case? - HELD THAT - As the instant are revision proceedings, separate and distinct from the reassessment proceedings, which can be said to have attained finality, and which cannot be lightly, if at all, disturbed. The present case would be covered by the principle of law enshrined in the legal maxim sublato fundamento cadit opus , i.e., when the cause (foundation) is removed, the effect (consequent action) ceases. As explained by the Apex Court in Kiran Singh vs. Chaman Paswan 1954 (4) TMI 48 - SUPREME COURT an order passed by an authority without jurisdiction is a nullity, and its invalidity can be challenged whenever and wherever it is sought to be enforced or relied upon. It is this principle, it may be noted, that prevailed with the Tribunal in the cases cited by the assessee, as indeed with the Hon'ble High Court in Keshab Narayanan Banerjee vs. CIT 1998 (8) TMI 55 - CALCUTTA HIGH COURT . It is to be noted that in the present case there was no occasion for the assessees to challenge the assessment proceedings inasmuch as there was acceptance of the returned income. The assessee s challenge to the reassessment proceedings in the instant, collateral proceedings is thus valid. We, in view of the foregoing, uphold the challenge to the revision of the assessments under reference and, further, hold the impugned revision/s as bad in law. The assessee/s succeeds.

Summary

Issues:
Invocation of section 263 of the Income Tax Act in reassessment proceedings.

Analysis:
1. The case involved two appeals by a husband and wife challenging the invocation of section 263 of the Income Tax Act in respect of their assessments for the Assessment Year 2012-13. The proceedings were initiated upon information that the assessees had sold land for Rs. 50 lacs, but they clarified to the Assessing Officer that they had not sold any land during that year. The assessment was concluded accepting the returned income. Subsequent revision proceedings were initiated on the ground that no enquiry into the source of investment in land had been made by the AO during the assessment proceedings. The assessees argued that since the jurisdiction for reopening the assessment was found invalid, there was no basis for revision, citing relevant case law.

2. The Revenue contended that acceptance of the returned income does not make the assessment proceedings bad in law, and revision proceedings can be initiated separately based on specific conditions specified in the Act. However, the Tribunal found that the basis for the reassessment proceedings, i.e., the reason to believe in non-returning of capital gains, was factually incorrect as the assessees had not sold any land during the relevant year. The Tribunal emphasized the importance of a valid assumption of jurisdiction to assess, as highlighted in relevant case laws.

3. The Tribunal observed that the AO's belief in escapement of income due to non-returning of capital gains was not supported by any material or valid reason. The AO had issued the notice for reassessment without having the sale deed at hand, raising questions about the jurisdictional validity of the proceedings. The Tribunal emphasized that a reason to believe in escapement of income is a jurisdictional issue that must be recorded and approved correctly, failing which the proceedings are invalidated.

4. The Tribunal highlighted the distinction between revision and reassessment proceedings, noting that finality of the assessment proceedings should not be lightly disturbed. However, in this case, the Tribunal applied the legal maxim "sublato fundamento cadit opus" - when the foundation is removed, the effect ceases. The Tribunal held that the revision proceedings were bad in law due to the lack of valid jurisdiction for reassessment, and the assessees' challenge to the reassessment in collateral proceedings was deemed valid.

5. Consequently, the Tribunal upheld the challenge to the revision of the assessments and deemed the revision proceedings as bad in law. The assessee's appeals were allowed, and the order was pronounced in open Court on June 15, 2022.