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2024 (2) TMI 428 - AT - Income TaxValidity of the assessment framed u/s 147 - borrowed belief to empower reassess the assessee - addition on account of investment in the disproportionate assets found by the CBI in search as being from unexplained sources - HELD THAT - Assessment under the taxation laws is year specific. Therefore belief of escapement of income for a valid assumption of jurisdiction to assess income u/s 147 of the Act must be year specific. Law does not permit reopening basis a consolidated belief of escapement of income for several years together particularly which does not specify AO s belief of income escaping assessment for the different years concerned. AO u/s 147 of the Act can reassess income only when he forms a belief of income of that year having escaped assessment. Reasons recorded therefore for reopening cases have to provide basis of belief of escapement of income year specific. AO s belief must be based on some tangible material having a live link or nexus with the income allegedly escaping assessment. Reassessment cannot be resorted to on the basis of vague indefinite or remote information. Where reassessment proceedings are initiated on the basis of information received from other departments/sources without examining them it cannot be said that the same was based on belief of the AO that income had escaped assessment. Applying the law on reopening of assessments u/s 147 of the Act as noted above by us to the facts of the case we find merit in the contention of assessee that the jurisdiction assumed by the AO to reopen the case of the assessee was invalid. The reasons for arriving at this finding are very obvious. No specific recording of escapement of income for the assessment year reopened by the AO. Consolidated reasons recorded for all impugned years. Reasons are vague - The reasons record the consolidated figure of disproportionate assets found by the CBI pertaining to all the impugned years before us. There is no recording of income escaping assessment for each particular assessment year being sought to be reassessed. The reasons are clearly vague mentioning income escaping assessment exceeding Rs. 1 lacs that too when all details of assets found with the assessee by way of CBI report were available with the AO mentioning even the date of investment. As stated above the law empowers him to reopen the assessment for a particular A.Y only on his satisfaction of income having escaped assessment for the said year. In the absence of the same the said reasons cannot therefore we hold empower the AO to reopen the case of the assessee for the assessment years involved. Belief of escapement of income borrowed from the preliminary report of the CBI with no application of mind by the AO to the same - In the present case the report of the CBI lists all assets clearly mentioning the fact of the names of different persons in which it was found invested including his wife and father. The report notes the fact of both the relatives having sources of income and thereafter goes on to state that the assets are disproportionate to the disclosed source of income of the assessee and his wife. Clearly it is just a preliminary report of the CBI who have in a general manner attributed all assets found to belong to the assessee. This report of the CBI certainly cannot be said to qualify as information leading to belief of escapement of income of the assessee. As decided in Andaleep Sehgal 2019 (8) TMI 515 - DELHI HIGH COURT affirmed by the Hon ble Apex court 2021 (3) TMI 194 - SC ORDER strengthens our finding as above wherein reopening resorted to by the AO based solely on investigation of Enforcement Directorate was set aside finding no independent inquiry conducted by the AO for arriving at his belief of escapement of income as in the said case to be borrowed belief not sufficient to empower him to reassess the assessee u/s 147 of the Act. Thus CBI report we hold could not have constituted information for the AO to form belief of escapement of income. Thus no hesitation in holding that reopening resorted to by the AO in all the impugned years before us being not in accordance with law. Decided in favour of assessee. Penalty levied u/s 271(1)(c) - Since we have held all the assessment orders to be invalid Penalty orders has no legs to stand upon and therefore penalty appeals of the assessee are also allowed. 1. ISSUES PRESENTED and CONSIDERED The core legal questions addressed in the judgment include:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of Reopening under Section 147
Issue 2: Penalty under Section 271(1)(c)
3. SIGNIFICANT HOLDINGS
In conclusion, the court's judgment underscores the necessity for specific, year-wise reasons for reopening assessments under Section 147, and the insufficiency of relying on preliminary external reports without independent verification by the AO. The judgment resulted in the quashing of both the assessment orders and the associated penalties.
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