2023 (7) TMI 1043 - AT - Income Tax

Reopening of assessment u/s 147 - Lack of jurisdiction of the authorities below - Reasons to believe - non- filing of return - HELD THAT - Reasons so recorded by the ITO, Ward-3, Gandhinagar of escaping assessment by the assessee as chargeable to tax mainly on the basis of the fact of not filing of return for the year under consideration by the appellant seems to be absolutely wrong in view of the mentioning filing of return by the assessee on 10.01.2015 much prior to the recording of reasons by the ITO, Ward-3, Gandhinagar dated 19.04.2016 itself. The very basis of reopening of assessment was found to be incorrect which leads to the belief of escaping assessment by the assessee and finally culminating into the order of addition under Section 143(3) r.w.s. 147 of the Act. The entire proceeding is thus liable to be quashed in view of wrong foundation. It appear the very basis of assessment u/s 148 of the Act on the wrong finding of fact of non- filing of return by the appellant found to be non-sustainable, we do not find any reason to deviate from the stand taken by DEEPAK WADHWA 2021 (3) TMI 332 - DELHI HIGH COURT and SAGAR ENTERPRISES 2001 (12) TMI 18 - GUJARAT HIGH COURT . In the case in hand, initiation of proceeding by recording of reasons by the ITO, Ward-3, Gandhinagar on the fact of non-filing of return of income for the year under consideration by the appellant which admittedly is found to be wrong, particularly, in view of the recording of filing of return by the appellant by the Ld. AO found to be bad in law. Thus, the entire proceeding is thus vitiated and found to be not sustainable in the eye of law and therefore, quashed. Decided in favour of assessee.

Summary

Issues Involved:
1. Initiation of re-assessment proceedings under Section 148 of the Income Tax Act.
2. Recording of reasons for re-assessment and the validity of the consequential order under Section 143(3) read with Section 147 of the Act.

Summary:

1. Initiation of Re-assessment Proceedings under Section 148:
The appellant challenged the initiation of re-assessment proceedings under Section 148 of the Income Tax Act, arguing that the authorities lacked jurisdiction. The case was reopened based on information that the appellant had transferred Rs. 7 Lakhs, deposited Rs. 30,01,000/- in HDFC Bank, Rs. 28,00,000/- in Kotak Mahindra Bank, and purchased immovable property for Rs. 1,27,00,000/- during the assessment year 2013-14. The ITO recorded reasons for reopening the assessment on 19.04.2016, citing non-filing of the return by the appellant.

2. Recording of Reasons and Validity of Consequential Order:
The appellant contended that the main basis for reopening the assessment was incorrect, as the return of income for the assessment year 2013-14 was filed on 10.01.2015. The Tribunal found that the very basis of reopening the assessment was wrong since the return was indeed filed, which vitiated the entire proceedings. The Tribunal relied on the judgments of the Hon'ble Jurisdictional High Court in Sagar Enterprises vs. ACIT and the Hon'ble Delhi High Court in Deepak Wadhwa vs. ACIT, which held that incorrect reasons for reopening an assessment render the proceedings unsustainable.

Conclusion:
The Tribunal concluded that the initiation of proceedings by recording reasons dated 19.04.2016 by the ITO, based on the incorrect fact of non-filing of the return, was bad in law. Consequently, the entire proceeding and the order making additions under Section 143(3) read with Section 147 of the Act were quashed. The appeal of the assessee was allowed.

Order Pronounced on 12/07/2023.