2022 (11) TMI 234 - AT - Income Tax

Reopening of assessment u/s 147 - assumption of jurisdiction under section 147 read with section 148 - HELD THAT - The validity of assumption of jurisdiction by the AO under section 147 read with Section 148 of the I.T. Act, 1961 is to be examined on the basis of the reasons recorded by the AO for coming to the belief that income had escaped assessment. Such reasons have to be recorded before assumption of Jurisdiction u/s 147 ( i.e. before issue of notice u/s 148 ). Any developments which take place after assumption of jurisdiction under section 147 of I.T. Act (i.e. 148 of I.T. Act) has no relevance for deciding whether the AO had reason to believe, before assumption of jurisdiction under section 147 of I.T. Act ( i.e. before issue of notice u/s 148 of I.T. Act) that income had escaped assessment. When such reasons are not made available by Revenue either to the assessee or to the appellate authorities Ld. CIT(A) as well as ITAT ; we have to conclude that the onus has not been discharged by Revenue to justify assumption of jurisdiction under section 147 of I.T. Act through issue of notice under section 148 of Income Tax Act. When the assumption of jurisdiction under section 147 read with section 148 of I.T. Act lacks validity, the resultant assessment order lacks legitimacy. Assessing Officer has conducted inquiries without authority of law before issue of notice under section 148 - Thus, the assumption of jurisdiction by the A.O. u/s147 of I.T. Act read with section 148 is based on inquiries conducted without the authority of law. It is of the firm view that assumption of jurisdiction under section 147 r.w.s. 148 on the basis of inquiries conducted without the authority of law lacks legitimacy. Assumption of jurisdiction must be held to be unauthorized, when the inquiries made for assuming the jurisdiction were unauthorized in law and the assessment order passed in pursuance of unauthorized assumption of jurisdiction under section 147 r.w.s. 148 of I.T. Act, also lacks legitimacy. Assumption of jurisdiction must be held to be unauthorized, when the inquiries made for assuming the jurisdiction were unauthorized in law and the assessment order passed in pursuance of unauthorized assumption of jurisdiction under section 147 r.w.s. 148 of I.T. Act, also lacks legitimacy. - Decided in favour of assessee.

Summary

Issues:
Notice under section 148, Reassessment order under section 147 r.w.s. 143(3), Addition on merits.

Notice under section 148:
The appeal was against the Order of the Ld. CIT(A) related to A.Y. 2009-10. The assessee challenged the notice issued under section 148 and the re-assessment order passed under section 147 r.w.s. 143(3) as illegal, bad in law, and without jurisdiction, besides challenging the addition on merits. The assessee argued that the notice under section 148 was not properly served as the address was incomplete and wrong, rendering the assessment framed under section 143(3)/147 unsustainable. The counsel cited various cases to support the argument, emphasizing the importance of proper notice service and reasons for reopening assessments.

Reassessment order under section 147 r.w.s. 143(3):
The assessee contended that the amount deposited in the bank account was from sale proceeds, not undisclosed income, challenging the addition made by the A.O. The counsel argued that the authorities failed to treat the deposit as undisclosed income, citing relevant judgments. The Tribunal found merit in the argument, emphasizing that the Assessing Officer did not provide reasons for reopening the assessment, which were crucial for justifying jurisdiction under section 147. The Tribunal noted that the assessment order lacked legitimacy due to unauthorized inquiries conducted by the Assessing Officer, leading to the conclusion that the assumption of jurisdiction under section 147 r.w.s. 148 was unauthorized. Consequently, the Tribunal annulled the assessment order and deleted the addition, allowing the appeal of the assessee.

Addition on merits:
The Learned Counsel for the Assessee argued that the A.O. did not have proper grounds to treat the amount deposited in the bank account as undisclosed income. The Tribunal agreed, highlighting the lack of justification for the addition and emphasizing the importance of providing reasons for reopening assessments. The Tribunal concluded that the assessment order lacked legitimacy due to unauthorized inquiries conducted by the Assessing Officer, leading to the annulment of the assessment order and deletion of the addition. The appeal of the assessee was allowed, and the addition was deleted.