2021 (4) TMI 901 - AT - Income Tax

Reopening of assessment u/s 147 - AO issued notice u/s 148 for the reasons that assessee has not filed the return - HELD THAT - As assessee is regularly filing his return with ITO, Ward-7(1), Jaipur. No efforts have been made to ascertain whether assessee has filed the return or not. Thus, the very reason for reopening the assessment that assessee has not filed the return of income is incorrect. In this regard, we draw strength from the decision of the Coordinate Bench of this Tribunal in the case of Sh. Kulwant Singh 2018 (12) TMI 1874 - ITAT JAIPUR . Thus where the Assessing Officer has reopened the assessment mechanically without application of mind and jurisdiction, we hold that the reopening of the assessment is not valid and the same is hereby quashed. - Decided in favour of assessee.

Issues Involved:
1. Validity of the order passed by the Assessing Officer (AO) under Section 147 of the Income Tax Act, 1961.
2. Confirmation of the addition of ?6,29,044 by treating the income from the sale of property as short-term capital gain instead of income from business and profession.
3. Application of Section 50C of the Income Tax Act without referring the matter to the District Valuation Officer (DVO).

Issue-wise Detailed Analysis:

1. Validity of the Order Passed by AO under Section 147:
The assessee contested the jurisdiction of the notice issued under Section 148 by ITO, Ward-2(3), arguing that it was without jurisdiction since the assessee regularly filed returns with ITO, Ward-7(1). The CIT(A) upheld the validity, stating the case was transferred to ITO, Ward-2(2) under Section 127, superseding general jurisdiction under Section 124. However, the ITAT noted that the order under Section 127 was passed after the notice under Section 148 was issued, rendering the notice void ab initio. The ITAT relied on the precedent set by the Rajasthan High Court in CIT Vs. Poonam Chand Surana, which held that an order passed by an officer without jurisdiction is void and not curable.

2. Confirmation of the Addition of ?6,29,044 as Short-term Capital Gain:
The AO treated the income from the sale of property as short-term capital gain based on the information received from DIT (I & CI), Jaipur, which indicated a discrepancy between the sale consideration and the value adopted by the stamp authorities. The assessee argued that the reopening of the assessment was solely based on this information without any independent enquiry by the AO, which is against the principle that the AO must have an independent reason to believe that income has escaped assessment. The ITAT agreed, citing several cases, including Pioneer Town Planners Pvt. Ltd. Vs. DCIT and Deepraj Hospital Pvt. Ltd. Vs. ITO, which emphasized that reassessment proceedings based on borrowed satisfaction without independent application of mind by the AO are invalid.

3. Application of Section 50C without Referring to DVO:
The assessee contended that the AO applied Section 50C without considering the peculiar circumstances of the case or referring the matter to the DVO. The ITAT observed that the AO did not conduct any further enquiry after receiving the information from DIT (I & CI). The reassessment was based solely on this information, which is not permissible as per judicial precedents. The ITAT reiterated the need for the AO to independently verify information before forming a belief of income escapement.

Conclusion:
The ITAT quashed the reopening of the assessment and the consequential reassessment, declaring them invalid due to lack of jurisdiction and mechanical application of mind by the AO. Consequently, the ITAT did not address the other grounds regarding the additions sustained by the CIT(A).

Order:
The appeal of the assessee was allowed, and the order was pronounced in the open court on 16th April 2021.

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