2024 (12) TMI 1171 - AT - Income Tax

Reopening of assessment u/s 147 - reasons to believe - HELD THAT - The jurisdiction assumed u/s 147 of the Act is in controversy. As pointed out on behalf of the assessee, the reasons to believe contemplated u/s 147 has been held with reference to FY 2013-14 relevant to AY 2014- 15 whereas the AY in consideration is AY 2012-13. Thus the entire foundation of holding the reason to believe has crumbled at the threshold. Besides, it is also noticed that the AO has made reference to certain information received from Investigation Wing based on search and seizure action carried out in ASL Group. However, the reference made to such information is non-descript and cryptic. Approval for issuing notice was granted by the Addl. Commissioner/Pr. Commissioner of Income Tax - Reasons recorded are shorn of any particulars of information whatsoever. The vague reasons cannot be the basis for assumption of jurisdiction u/s 147 of the Act as held in long line of precedents. The approval granted based on such reasons is devoid of any objectivity and formation of reasons to believe by AO is in relation to a different AY. CIT has granted approval under 151 of the Act based on such reasons apparently without application of mind. The approval under s. 151 so granted thus cannot be countenanced in law. The notice issued under s. 148 of the Act based on reasons and approval suffering from the vice of substantive defect is clearly nonest. Thus, the jurisdiction assumed is without meeting the pre-requisites stipulated u/s 147 of the Act. Hence the re-assessment order thus is bad in law. Re-assessment order in question is quashed. Appeal of the assessee is allowed.

Summary

Issues:
Jurisdictional defect in assumption of jurisdiction under s. 147 of the Income Tax Act and additions on merits.

Analysis:

1. The appeal was filed by the assessee challenging the First Appellate order passed by the Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre, Delhi, arising from the assessment order pertaining to the assessment year 2012-13.

2. The assessee raised legal contentions regarding jurisdictional defect in assumption of jurisdiction under s. 147 of the Act and additions on merits.

3. The reasons recorded for issuing notice under s. 148 of the Act were based on information received from the Investigation Wing, indicating that the assessee had not disclosed income earned during the relevant financial year. The approval for issuing notice was granted by the Addl. Commissioner/Pr. Commissioner of Income Tax.

4. The Ld. Counsel for the assessee argued that the reasons recorded and approved under s. 151 suffered from multiple defects, as they pertained to a different assessment year than the one in question. It was contended that the approval lacked objectivity and was granted without proper application of mind.

5. On the merits, the Ld. Counsel argued that the allegations of cash received on the sale of property were unfounded, as no sale transactions had taken place during the relevant financial year. The AO had not verified the facts with the alleged party involved.

6. The Tribunal observed that the reasons recorded for assuming jurisdiction under s. 147 were vague and lacked specific information, rendering them insufficient to support the reopening of assessment. The Tribunal cited various precedents to support this position.

7. The approval granted by the Pr. Commissioner of Income Tax was deemed to lack objectivity and was based on reasons related to a different assessment year, making the notice issued under s. 148 invalid. Consequently, the reassessment order was held to be without legal basis and was quashed.

8. Due to the jurisdictional defects, the Tribunal did not delve into the merits of the additions made by the AO.

9. As a result, the appeal of the assessee was allowed, and the reassessment order was set aside.

This detailed analysis highlights the procedural and substantive issues raised in the appeal, focusing on the jurisdictional defects in assuming jurisdiction under s. 147 of the Income Tax Act and the subsequent invalidity of the reassessment order.