2023 (6) TMI 27 - AT - Income Tax

Reopening of assessment - Lack of jurisdiction u/s 147 - Reasons cited were that the assessee did not file return and the capital gain on sale consideration was not brought to tax - HELD THAT - The assessee had duly filed return of income on 31.03.2009 thereby the most basic reason itself is wholly incorrect and not existed and noticeably PAN of the assessee was duly mentioned in sale deed. Secondly, the sale consideration of Rs.98,76,000/- was giving rise to allegation of escapement towards the sale consideration for the purposes of escapement of capital gain whereas actual share of sale consideration relatable to the assessee stands at Rs.24,69,000/- only and therefore, the basic information is yet again wrong and mentioned in reasons without application of mind. We find that the issue is squarely covered in favour of the assessee by the judgments rendered in the case of Mumtaz Hazi Mohmad Menon 2018 (10) TMI 366 - GUJARAT HIGH COURT as held that the assumption of jurisdiction on the basis of wholly incorrect facts cannot be conferred in law. In this case also, the reasons cited were that the assessee did not file return and the capital gain on sale consideration was not brought to tax which reasons were found to be factually incorrect. The assessee had return of income which was not noticed by the AO. Assessee appeal allowed.

Summary

Issues:
The issues involved in the judgment are lack of jurisdiction under Section 147 of the Income Tax Act and the legitimacy of addition/disallowance on merits.

Lack of Jurisdiction under Section 147:
The assessee, a civil/criminal lawyer, filed a return of income for Assessment Year 2009-10. The Assessing Officer alleged escapement of income due to the sale of property at a value different from the circle rate. The assessment was reopened under Section 147/148 of the Act. The CIT(A) upheld the assumption of jurisdiction but granted partial relief on merits. The Tribunal considered the reasons recorded for issuing notice under Section 148 and found discrepancies. The Tribunal referred to case law where reopening based on incorrect facts was deemed unsustainable in law. As the assessee had filed the return of income and the Assessing Officer failed to consider this, the Tribunal held that lack of jurisdiction under Section 147 was evident. Consequently, the reassessment proceedings were quashed, and the appeal of the assessee was allowed.

Legitimacy of Addition/Disallowance on Merits:
The Tribunal did not delve into the merits of the addition/disallowance due to the lack of jurisdiction under Section 147. As the reopening proceedings were deemed impermissible based on incorrect facts, the Tribunal set aside the action of the CIT(A) and quashed the reassessment proceedings. The appeal of the assessee was allowed based on the lack of jurisdiction under Section 147 of the Act.