2020 (9) TMI 464 - AT - Income Tax

Reopening of assessment u/s 147 - notice u/s. 143(2) was issued by the AO before the date when the assessee filed his return of income - HELD THAT - Notice u/s. 148 of the Act dated 08.05.2014 was issued asking the assessee to file the return of income. In response to the same, the assessee filed letter dated 21.08.2014 filed the return of income in response to these notices. But the AO has issued notices u/s. 143(2) of the Act dated 11.08.2014 i.e. prior to the filing of the return of income i.e. on 21.08.2014. We are of the view that notice u/s. 143(2) dated 11.08.2014 was issued by the AO before the date when the assessee filed his return of income i.e. 21.08.2014. Assessment framed by the AO on the basis of these notices is not sustainable in the eyes of law, hence, we quash the same. Our view is supported by the various following judgments/decisions especially the Hon ble Supreme Court Decision in the case of Laxman Das Khandelwal 2019 (8) TMI 660 - SUPREME COURT . Assessee has filed the return on 21.08.2014 and thereafter no notice u/s. 143(2) of the Act was issued by the AO, however, the same is mandatory requirement under the provisions of law. - Decided in favour of assessee.

Issues Involved:
1. Jurisdiction under Section 147/148 without satisfying the requirements of the proviso to Section 147.
2. Jurisdiction under Section 147/148 without "reason to believe."
3. Approval under Section 151(1) for reopening the assessment.
4. Satisfaction of higher officer for reopening the assessment.
5. Principles of natural justice.
6. Assessment based on a change of opinion.
7. Addition based on non-production of the Director of M/s Clax Marketing Pvt. Ltd.
8. Addition without appreciating the documents proving identity, creditworthiness, and genuineness of the transaction.
9. Validity of assessment under Section 147/148 based on prior notice under Section 143(2).

Detailed Analysis:

1. Jurisdiction under Section 147/148 without satisfying the requirements of the proviso to Section 147:
The assessee argued that the Assessing Officer (AO) erred in reopening the assessment after four years without the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The tribunal noted that the AO issued the notice under Section 148 based on specific information received from the office of DCIT, Central Circle-22, New Delhi, which justified the reopening.

2. Jurisdiction under Section 147/148 without "reason to believe":
The assessee contended that the AO lacked "reason to believe" for reopening the assessment, making the assessment order bad in law. The tribunal observed that the AO reopened the case based on the Investigation Report, which indicated that the assessee had introduced its income from undisclosed sources through entry operators. This constituted a valid "reason to believe."

3. Approval under Section 151(1) for reopening the assessment:
The assessee claimed that the AO did not take the necessary approval under Section 151(1) before reopening the assessment. The tribunal found that the AO had obtained prior approval from the Ld. CIT, Delhi-VI, New Delhi, before issuing the notice under Section 148.

4. Satisfaction of higher officer for reopening the assessment:
The assessee argued that the satisfaction of a higher officer was required for reopening the assessment. The tribunal noted that the AO had acted on specific information received from the DCIT, Central Circle-22, New Delhi, which justified the reopening.

5. Principles of natural justice:
The assessee claimed that the AO breached the principles of natural justice by not providing the material on which the AO had formed his "reason to believe." The tribunal observed that the AO had provided the reasons for reopening to the assessee and had given opportunities to furnish details and documents.

6. Assessment based on a change of opinion:
The assessee argued that the assessment was based on a change of opinion on the same facts and information provided during the original assessment proceedings under Section 143(3). The tribunal found that the reopening was based on new information received from the Investigation Report, which was not available during the original assessment.

7. Addition based on non-production of the Director of M/s Clax Marketing Pvt. Ltd.:
The assessee contended that the AO made an addition solely based on the non-production of the Director of M/s Clax Marketing Pvt. Ltd. The tribunal noted that the AO had made the addition after examining the documentary evidence and concluding that the assessee had introduced its income from undisclosed sources through entry operators.

8. Addition without appreciating the documents proving identity, creditworthiness, and genuineness of the transaction:
The assessee argued that the AO made the addition without appreciating the documents proving the identity, creditworthiness, and genuineness of the transaction with M/s Clax Marketing Pvt. Ltd. The tribunal found that the AO had examined the documents and concluded that the creditworthiness and genuineness of the transactions were not proved.

9. Validity of assessment under Section 147/148 based on prior notice under Section 143(2):
The assessee raised an additional ground, arguing that the assessment under Section 147/148 was invalid because the notice under Section 143(2) was issued before the assessee filed the return in response to the notice under Section 148. The tribunal admitted the additional ground and found that the AO had issued the notice under Section 143(2) on 11.08.2014, before the assessee filed the return on 21.08.2014. The tribunal held that the assessment framed by the AO on the basis of these notices was not sustainable in the eyes of law and quashed the reassessment.

Conclusion:
The tribunal allowed the assessee's appeal, quashing the reassessment on the ground that the notice under Section 143(2) was issued before the assessee filed the return in response to the notice under Section 148. The decision was pronounced on 10.09.2020.

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