2021 (3) TMI 188 - HC - Income Tax

Reopening of assessment u/s 147 - reasons to believe - HELD THAT - As the Tribunal has rightly noted, the jurisdiction for the Assessing Officer to resort to Section 147 of the Income Tax Act is crystallized in the Reasons supplied. The Tribunal has rightly, observed that the Reasons only referred to a need to verify the documents and there is no link between the statement that there is a reason to believe that income as escaped assessment with the rest of the Reasons supplied. It is not permissible, as rightly noted by the Tribunal, to add to the Reasons. The contention that there was an information received was not included in the Reasons. The Tribunal has followed the decision of the Jurisdictional High Court in the case of Nivi Trading Limited 2015 (4) TMI 411 - BOMBAY HIGH COURT . If the Tribunal in these facts and circumstances has found that the reopening of assessment was without jurisdiction based on reading of the Reasons, it cannot be said that any perverse or illegal view has been taken by the Tribunal. No question of law arises. The Appeal is dismissed.

Summary

Issues:
1. Validity of quashing assessment proceedings due to lack of recording 'reasons to believe' under Section 147 read with Section 148 of the Income Tax Act, 1961.
2. Justification of quashing assessment proceedings despite tangible material supporting the belief of income escaping assessment.
3. Legality of ITAT's methodology under Rule 27 of the ITAT Rules in contrast to Civil Procedure Code.

Analysis:

Issue 1:
The Appellant-Revenue challenged the order quashing assessment proceedings, arguing that the assessing officer had failed to record 'reasons to believe' as required by law. The Respondent-Assessee filed the Return of Income, objected to the notice under Section 148, and eventually, the assessment was conducted, treating a specific amount as business income. The Commissioner of Income Tax (Appeals) partly allowed the appeal, leading to the Appellant's appeal being dismissed. The Tribunal found that the Reasons supplied for reopening the assessment lacked a clear link to the belief of income escaping assessment. The Tribunal's decision was supported by a previous High Court ruling, and it was concluded that no perverse or illegal view had been taken. Consequently, the Appeal was dismissed.

Issue 2:
The Appellant-Revenue contended that the assessing officer had tangible material supporting the belief of income escaping assessment, justifying the reopening of the assessment. However, the Tribunal found that the Reasons provided did not establish a valid reason to believe that income had escaped assessment. The Tribunal emphasized the importance of the Reasons supplied in justifying the jurisdiction to resort to Section 147. It was noted that additional information received was not included in the Reasons, leading to the conclusion that the reopening of the assessment was without jurisdiction. The Tribunal's decision was in line with a previous High Court ruling, and it was held that no question of law arose, resulting in the dismissal of the Appeal.

Issue 3:
Regarding the methodology adopted by the ITAT under Rule 27 of the ITAT Rules, the Appellant-Revenue argued against the Tribunal entertaining additional grounds challenging the legality of the notice under Sections 147 and 148 of the Income Tax Act. However, it was found that the Respondent-Assessee had raised challenges regarding legality and jurisdiction before the Assessing Officer and the Commissioner of Income Tax (Appeals). Rule 27 of the ITAT Rules allowed the Respondent to support the order on any grounds decided against them. Therefore, the Tribunal's decision to consider these grounds was deemed acceptable, and this ground of challenge was not upheld.

In conclusion, the High Court dismissed the Appeal filed by the Appellant-Revenue, upholding the Tribunal's decision to quash the assessment proceedings due to the lack of valid reasons to believe that income had escaped assessment, as required under the Income Tax Act.