2022 (8) TMI 796 - AT - Income Tax

Reopening of assessment u/s 147 - assumption of jurisdiction for issuing of notice u/s. 148 - Whether Assessing Officer has assumed the jurisdiction on wrong facts? - on the basis of AIR information, the case of the assessee was reopened and in the bank account there was no mention of PAN of the assessee and during a search in the PAN database, the name of the assessee did not appear therefore the Assessing Officer was left with no option but to issue notice u/s. 148 - HELD THAT - As per AIR information available on record, the Assessing Officer observed that assessee has purchased an immovable property which has escaped income. AO wrote a letter to assessee to explain the source of such investments. The assessee did not reply to the said notice. AO further notes that PAN database was searched in the system but could not find the particulars about assessee therefore he held that no question of assessment u/s. 143(3) arises as no return was visible on the system and therefore he held that there has been a failure on the part of assessee to make a return u/s. 139 and he initiated the reassessment proceedings. A list of questions which needs to be filed by AO while initiating reopening of a case. Sl.No. 8 of the questions requires Assessing Officer to answer to a question as to whether provisions of Section 147(a) or 147(b) are applicable. Against reply to this question Section 147(a) has been mentioned and it has also been mentioned that no return has been furnished by the assessee. On the contrary, the fact remains that assessee did file return of income u/s. 139 of the Act on 19.03.2013. The date of filing of the return is much before than the date of recording of reasons which is 27.03.2019. AO has noted that PAN was searched in the system and DCR of respective year has also been consulted and he had not found the copy of return filed by assessee. In view of the fact of having filed the return of income by the assessee the finding of the Assessing Officer that no return has been furnished by the assessee is wrong and therefore AO has reopened the case by recording a wrong fact. The copy of acknowledgment of return for the relevant year has been made part of this order. Had the Assessing Officer noted the correct facts of filing the return, he would have verified the fact of escapement of income from the return of income which he has not done therefore the notice issued u/s. 147 is not legally tenable. Thus quash the notice u/s. 147 and therefore hold the assessment order void ab initio and the consequent order of ld. CIT(A) is also held to be a void ab initio. - Decided in favour of assessee.

Issues Involved:
1. Admissibility of additional grounds of appeal.
2. Validity of the reopening of the assessment.
3. Justification of the addition made by the Assessing Officer (AO) on grounds different from those stated in the reopening notice.
4. Legality of reopening based on incorrect facts regarding the filing of the return.

Detailed Analysis:

1. Admissibility of Additional Grounds of Appeal:
The appellant filed additional grounds of appeal, which were considered legal in nature and derived from existing material on record. The respondent agreed to the admission of these additional grounds. The Tribunal admitted the additional grounds and proceeded to hear arguments on them.

2. Validity of the Reopening of the Assessment:
The appellant argued that the reopening of the assessment was initiated to verify an investment in property amounting to Rs. 51,95,000/-. However, the AO made an addition of Rs. 10,70,000/- on the grounds that the appellant could not explain the source of deposits for the property investment. The appellant contended that since the AO did not make any addition based on the initial reason for reopening, the assessment order should be considered void ab initio, referencing the case law of CIT vs. Jet Airways Ltd. 331 ITR 236.

3. Justification of the Addition Made by the AO:
The appellant's additional grounds included that the addition of Rs. 10,70,000/- was not based on the belief of escapement of income initially formed by the AO. The AO had initially reopened the case based on an investment in immovable property, but the addition was confirmed as unexplained credit, which was different from the original reason for reopening. The Tribunal found that the AO had indeed made an addition on a different basis than what was initially recorded for reopening, making the assessment order void ab initio.

4. Legality of Reopening Based on Incorrect Facts:
The appellant filed a return of income on 19.03.2013, but the AO initiated reopening on the incorrect assumption that no return had been filed. The Tribunal reviewed the material on record and found that the appellant had indeed filed the return, and the AO's assumption was incorrect. The Tribunal referenced similar cases, including Mumtaz Haji Mohammad Memon vs. ITO and Sagar Enterprises vs. ACIT, where reopening based on incorrect facts was held to be bad in law.

The Tribunal also cited the case of Shri Sunil Kumar Rastogi HUF vs. ITO, where the Hon'ble Allahabad High Court quashed a notice issued under similar circumstances. The Tribunal concluded that the AO's reopening of the case based on the incorrect fact of non-filing of the return was not legally tenable. Consequently, the notice issued under section 147 was quashed, and the assessment order was declared void ab initio.

Conclusion:
The Tribunal allowed the additional ground regarding the incorrect assumption of non-filing of the return, quashing the notice under section 147 and declaring the assessment order void ab initio. As a result, other grounds of appeal were not adjudicated, and the appeal was partly allowed. The judgment emphasized the importance of accurate facts in the reopening of assessments and upheld the legal precedents protecting taxpayers from incorrect reassessment proceedings.

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