2024 (10) TMI 474 - AT - Income Tax

Reopening of assessment u/s 147 - reasons to believe - borrowed satisfaction v/s independent application of mind - unexplained investment in purchase of property and assessee has also not filed her return of income - HELD THAT - AO initiated proceedings u/s 147 r.w.s.148 on basis of borrowed information received from the Sub Registrar for valuation of the immovable property, without verifying the correctness of the information and CIT gave approval without applying his mind in slipshod manner. As approval/sanction given by CIT was without recording his own independent satisfaction as noted above, therefore, the reopening was not sustainable as per above judicial pronouncements and irregularities noted. Thus, in that eventuality, issuance of notice u/s 148 and all the consequent proceedings and assessment order passed was not in accordance with law. Thus find merit in the contention of the ld. A/R, therefore, quash the proceedings under section 147 of the Act. Addition u/s 69 - AO while making the addition has not invoked or applied any provisions of law. AO has not stated under what provision of law he has made the addition and under what head whether, under business or trading income, agriculture income, capital gain or under section 48, 56 or under section 68 or 69. Thus the addition so made without any provision of Act is also against the law and liable to be deleted on this ground alone. Without invoking the provision of Act/law, the AO cannot make the addition. As the recorded reason/impugned assessment order is silent under which provision of the Act the addition is sought to be made. It is well settled that the reasons cannot be supplemented by assessment order or affidavit. Unless the assessee is put to the notice as to the exact contravention or provisions of law under which assessment or additions are sought to be made, the assessee cannot defend his case. Thus, addition made and sustained by the lower authorities deserves to be deleted. Therefore, allow the present appeal on merits as well.

Summary

Issues Involved:

1. Legality of the proceedings under sections 147/148 of the Income Tax Act, 1961.
2. Validity of the notice under section 148 and service thereof.
3. Condonation of delay in filing the appeal.
4. Addition of Rs. 28,02,415/- as income from undisclosed sources.
5. Charging of interest under sections 234A, 234B, and 234C.
6. Procedural lapses in approval for reassessment.

Detailed Analysis:

1. Legality of the Proceedings Under Sections 147/148:

The assessee challenged the legality of the proceedings initiated under sections 147/148 of the Income Tax Act, asserting that the proceedings were "illegal, bad in law, barred by limitation, without jurisdiction, and without approval/satisfaction from the proper or competent authority." The tribunal found that the approval for reopening the assessment was not properly obtained, as the Principal CIT gave a consolidated approval for multiple assessees in one document, which was not duly signed or dated. This procedural lapse rendered the reopening unsustainable, leading to the quashing of the proceedings under section 147.

2. Validity of the Notice Under Section 148 and Service Thereof:

The tribunal addressed the issue of non-service of the notice under section 148, which is a mandatory requirement for valid reassessment proceedings. The assessee contended that the notice was not served, and the assessment order merely mentioned its issuance without evidence of service. The tribunal cited precedents, emphasizing that proper service is a jurisdictional requirement. In the absence of evidence of service, the reassessment proceedings were deemed invalid.

3. Condonation of Delay in Filing the Appeal:

The assessee filed an application for condonation of an 80-day delay in filing the appeal, supported by an affidavit explaining the delay due to non-receipt of the order and miscommunication by the counsel. The tribunal, considering the reasons as constituting "sufficient cause" and in the absence of a counter-affidavit from the revenue, condoned the delay, allowing the appeal to be heard on merits.

4. Addition of Rs. 28,02,415/- as Income from Undisclosed Sources:

The tribunal examined the addition of Rs. 28,02,415/- made by the AO as income from undisclosed sources related to the purchase of property. The AO failed to specify under which provision of the Income Tax Act the addition was made, which is a fundamental requirement. The tribunal noted that the AO did not invoke any specific provisions such as sections 68 or 69, rendering the addition unsustainable. Furthermore, the tribunal found that the property was purchased in 1999, and the transaction in 2010 was merely a formal registration, negating the basis for the addition in the assessment year 2011-12.

5. Charging of Interest Under Sections 234A, 234B, and 234C:

The assessee contended that the interest charged under sections 234A, 234B, and 234C was contrary to the provisions of law. However, the tribunal's decision primarily focused on the quashing of the reassessment proceedings and the deletion of the addition, implicitly addressing the issue of interest as a consequence of the primary findings.

6. Procedural Lapses in Approval for Reassessment:

The tribunal highlighted significant procedural lapses in obtaining approval for reassessment. The approval was given in a consolidated manner for multiple assessees, lacking individual assessment and proper documentation. The tribunal emphasized the necessity of independent satisfaction by the approving authority, which was absent in this case, leading to the quashing of the reassessment proceedings.

Conclusion:

The tribunal allowed the appeal, quashing the reassessment proceedings under section 147 and deleting the addition of Rs. 28,02,415/-. The decision was based on procedural lapses, lack of proper service of notice, and failure to specify the legal basis for the addition. The judgment underscores the importance of adherence to procedural requirements and the necessity for clear jurisdictional grounds in reassessment proceedings.