2023 (3) TMI 712 - AT - Income Tax

Reopening of assessment u/s 147 - Reasons to believe - no return has been filed by the assessee - link between the information received from the Investigation Wing and the formation of reason to believe - HELD THAT - AO grossly erred in mentioning in the column No.8(a) of the format pertaining to approval of the ld.PCIT, Ghaziabad by mentioning that no return has been filed by the assessee. It is pertinent to mention that the copy of the return reveals that the assessee did file the return with ITO-2(1), Ghaziabad and reason has been recorded by the very Income-tax Officer which shows clear nonapplication of mind by the AO. When the AO has proceeded to initiate reassessment proceedings on the wrong premise that the assessee has not filed return of income for relevant assessment year and, in fact, the assessee did file the return of income, then, this is a clear case of non-application of mind and non-consideration of relevant material by the AO. When the AO has not created any link between tangible material and the formation of reason to believe that income had escaped assessment, then, the information received from Investigation Wing cannot be said to be tangible material per se without further inquiry being undertaken by the AO. In the present case also the AO initiated reassessment proceedings on the wrong premise that the assessee has not filed return of income for AY 2009-10 and the AO, without verifying and creating a link between the information received from the Investigation Wing and the formation of reason to believe that income has escaped assessment, initiated reassessment proceedings u/s 147 of the Act and issued notice u/s 148 of the Act and, therefore, the issue is squarely covered in favour of the assessee

Issues Involved:
1. Denial to admit additional evidence under Rule 46A(1)(d) of the Income Tax Rules.
2. Ignorance of the terms and conditions of the collaboration agreement.
3. Rights of the second floor with roof as a result of the transaction.
4. Consideration mentioned in the transfer deed for stamp duty purposes.
5. Ignoring the contents of the order of CIT-Appeals, Aligarh.
6. Opportunity to produce evidence for justice.
7. Issuance of notice u/s 148 without proper application of mind and independent inquiry.

Summary:

1. Denial to Admit Additional Evidence:
The assessee argued that the CIT(A) Ghaziabad erred by denying the opportunity to file additional evidence under Rule 46A(1)(d) of the Income Tax Rules. This denial was claimed to be against the principles of law, natural justice, and humanitarian grounds.

2. Ignorance of Collaboration Agreement:
The assessee contended that the CIT(A) Ghaziabad ignored the terms and conditions of the collaboration agreement, which were fundamental to the transactions between the property owner and the builders/co-builder.

3. Rights of the Second Floor with Roof:
The appellant claimed that they were entitled to the rights of the second floor with roof as a result of the transaction for constructing the building and were not to receive anything else.

4. Consideration in Transfer Deed:
The assessee argued that the consideration mentioned in the transfer deed of the second floor with roof rights was only to ascertain the stamp duty based on the prevalent circle rate, without which the execution of the sale deed was not possible.

5. Ignoring Order of CIT-Appeals, Aligarh:
The assessee pointed out that the CIT(A) Ghaziabad ignored the order of CIT-Appeals, Aligarh, which addressed similar issues regarding the same property and owner, Mrs. Gurbachan Kaur, for AY 2009-10.

6. Opportunity to Produce Evidence:
The assessee emphasized the need for an opportunity to produce evidence, such as confirmations and affidavits from the property owner, to deliver justice. They prayed for the order of the CIT(A) Ghaziabad to be quashed due to undue hardship.

7. Issuance of Notice u/s 148:
The assessee raised an additional legal ground challenging the issuance of notice u/s 148 of the Act without proper application of mind and without conducting an independent inquiry by the AO. The Tribunal, relying on the Supreme Court's judgment in NTPC vs. CIT, allowed this ground for adjudication.

Tribunal's Findings:

Issuance of Notice u/s 148:
The Tribunal noted that the AO erroneously mentioned that the assessee did not file a return for AY 2009-10, whereas the return was indeed filed. This demonstrated non-application of mind by the AO. The Tribunal referred to the Delhi High Court's judgment in PCIT vs. RMG Polyvinyl (I) Ltd., which held that information from the Investigation Wing alone is not tangible material without further inquiry by the AO. Consequently, the Tribunal quashed the notice u/s 148 and the consequent reassessment proceedings.

Conclusion:
The appeal filed by the assessee was allowed, and the initiation of reassessment proceedings u/s 147 and issuance of notice u/s 148, along with all consequent proceedings and orders, were quashed. The grounds on merits were not adjudicated as they became academic. The order was pronounced on 13.03.2023.

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