2021 (6) TMI 95 - AT - Income Tax

Reopening of assessment u/s 147 - investment in property - full transaction value of the property alleged to be purchased to by the assessee - whether approval granted was assailed as a mechanical exercise of power and hence the order deserves to be quashed - HELD THAT - In the facts of the present case, when the Sale Deed is taken into consideration, it is clearly evident that it spells out the fact that only part consideration was moving from the assessee and thus if this bare document itself had been seen before the formation of the belief by the A.O. then while recording the reasons the AO would not have recorded the entire consideration as assessee's contribution and would have noticed that there were other contributors also No doubt the assessee was not a regular tax payer and thus, no return could be consulted by the Assessing Officer while exercising the powers of re-opening. However, the fact remains that it was incumbent on him to at least check the facts recorded in the Sale Deed carefully ascertaining the extent of the assessee's contribution. Since the facts set out in the Sale Deed cognizance of which was taken by the Assessing Officer himself while making the addition were un-disputably clear the conclusion that admittedly its proper consideration escaped the notice of not only the A.O. but the approving authority also is clearly evident from record. Thus not finding fault in the manner of the specific words recorded in the order to grant approval, which has been the crux of ld AR's argument the objection is sustained on the fact that no care or attention evidently was taken to consider the bare preliminary facts itself and the power was exercised mechanically without examining the record. An authority vested with the onerous powers of re-opening u/s 147 and granting of approval is expected to exercise its power consciously, carefully and with full awareness. The public at large cannot be put to the mercies of careless, casual, arbitrary or whimsical exercise of power. The order deserves to be quashed on this count itself. On a careful consideration of explanation offered right at the assessment stage partially recorded as find that even on merits the assessee has sufficiently explained the availability of funds. As money transactions from a Middle East country where the assessee's son was working who ultimately shifted to USA. The money transfer details clearly establish sufficiency of funds. No infirmity in the evidences relied upon and available on record has been pointed out. Satisfied by the availability of funds, even on merits, the assessee deserves relief - Decided in favour of assessee.

Issues Involved:
1. Reopening of the case under section 148.
2. Validity of proceedings under section 148.
3. Mechanical approval for initiating proceedings under section 147.
4. Non-service of notice under section 148.
5. Addition of unexplained investment.

Issue-wise Detailed Analysis:

1. Reopening of the Case under Section 148:
The assessee challenged the reopening of the case under section 148, arguing that the notice was never served, and the reasons to believe that income had escaped assessment were not valid. The reopening was based on information about a property purchase valued at ?63.51 lakhs, but the assessment was ultimately framed on ?28.04 lakhs, which was the assessee's share.

2. Validity of Proceedings under Section 148:
The assessee contended that the proceedings under section 148 were invalid as the notice was never served, and the reasons to believe were incorrect. The tax authorities held that non-receipt of notice is not equivalent to non-service. However, the tribunal found that the tax authorities did not provide specific findings or address the mode and manner of issuance, nor confirm the correct address. The tribunal concluded that the proceedings were arbitrary and non-maintainable, thus quashing the order on this count.

3. Mechanical Approval for Initiating Proceedings under Section 147:
The assessee argued that the approval for reopening the case was given mechanically without application of mind. The tribunal agreed, noting that the approving authority did not carefully consider the facts, particularly the Sale Deed, which showed the assessee's share in the property. The tribunal emphasized that authorities must exercise their powers consciously and carefully, and found the approval process to be mechanical and arbitrary.

4. Non-service of Notice under Section 148:
The assessee maintained that the notice under section 148 was never served, and subsequent notices had no sanctity. The tribunal found that the tax authorities failed to prove the service of notice and did not follow the proper procedure under Section 282 (1) of the Income Tax Act read with CPC procedure. The tribunal held that the reassessment proceedings were without jurisdiction and deserved to be nullified.

5. Addition of Unexplained Investment:
On merits, the assessee explained the sources of the investment in the property, including remittances from abroad, agricultural income, and household savings. The tribunal found that the assessee had sufficiently explained the availability of funds, and the tax authorities had ignored these explanations and evidences. The tribunal concluded that the addition made by the AO was unjustified and deserved to be deleted.

Conclusion:
The tribunal quashed the reassessment proceedings on the grounds of invalid service of notice, mechanical approval for reopening, and arbitrary exercise of power. Additionally, the tribunal found that the assessee had adequately explained the sources of investment, and thus, the addition of unexplained investment was also deleted. The appeal of the assessee was allowed.

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