2021 (4) TMI 348 - AT - Income Tax

Reopening of assessment u/s 148 - re-opening was done in the facts of the present case recording that no return was filed - whether no reasons to believe that the income of the assessee had escaped assessment?- HELD THAT - Reason is patently contradictory to the facts recorded in the assessment order itself. The language recorded in the reasons recorded gives credence and strength to the allegation raised on behalf of the assessee that it is a mechanical exercise of power wherein non-application of mind is clearly evident as no effort was made to see whether any return had been filed or not by the assessee. Had such an exercise been attempted, the return filed would have been noticed and application of mind would have been based on cogent facts. In the facts as they stand, the formation of belief that income has escaped assessment is plainly a mechanical exercise looking of non-application of mind. Once the return filed in due course itself remains ignored, the mechanical exercise of power becomes the inescapable conclusion. Thus, the position of law as considered by the Co-ordinate Bench in the case of Monika Rani 2020 (9) TMI 271 - ITAT CHANDIGARH comes into play. Thus the appeal filed by the assessee succeeds on the jurisdiction ground itself. The impugned order is set aside and the assessment order accordingly is quashed.

Summary

Issues:
1. Challenge to the assumption of jurisdiction for reopening the case under section 148 of the Income Tax Act.
2. Validity of the reasons recorded for reopening the assessment.
3. Application of mind by the Assessing Officer in the process of reopening the assessment.
4. Legal precedent and decisions relied upon for challenging the jurisdiction of the Assessing Officer.

Analysis:
1. The appeal challenged the correctness of the CIT(A)'s order regarding the reopening of the case under section 148 for the assessment year 2010-11. The primary ground of challenge was the assumption of jurisdiction itself. The appellant argued that the AO's jurisdiction was not valid, citing a case of non-application of mind evident from the recorded reasons. The appellant relied on judicial precedents, including decisions from the Chandigarh Bench of the ITAT and other High Courts, to support the argument that the appeal deserved to be allowed based on jurisdictional grounds alone.

2. The Assessing Officer had reopened the assessment based on the reason that the assessee had not filed the return of income. However, upon examination, it was found that the reason recorded was contradictory to the facts in the assessment order itself. The AO's failure to acknowledge the return filed by the assessee indicated a mechanical exercise of power without proper application of mind. This lack of due diligence in verifying whether a return had been filed led to the conclusion that the belief of income escaping assessment was based on incorrect grounds.

3. The jurisdictional issue was addressed by the CIT(A), noting that the notice under section 148 had been issued as per the procedure, and no objection was raised during the assessment proceedings by the appellant. However, the appellant successfully argued that the reasons recorded for reopening the assessment did not align with the actual facts documented in the assessment order, indicating a lack of proper application of mind by the Assessing Officer. This failure to consider relevant information led to the quashing of the assessment order.

4. Legal precedents and decisions were crucial in challenging the jurisdiction of the Assessing Officer. The appellant relied on cases where assessments were invalidated due to incorrect facts forming the basis of reopening, emphasizing the importance of a valid reason supported by accurate information. The decisions from various ITAT benches and High Courts highlighted the necessity of a thorough examination of facts before assuming jurisdiction for reopening assessments. The reliance on established legal principles and precedents played a pivotal role in the successful appeal challenging the jurisdictional aspect of the assessment.

In conclusion, the appellate tribunal allowed the appeal of the assessee based on the jurisdictional ground alone, setting aside the impugned order and quashing the assessment order. The decision underscored the significance of proper application of mind by the Assessing Officer and the requirement for valid reasons supported by accurate facts when reopening assessments under section 148 of the Income Tax Act.