2021 (8) TMI 161 - AT - Income Tax

Reopening of assessment u/s 147 - certain information stated to be received from Sales Tax Department - HELD THAT - A plain reading of reasons provided would overtly show that the AO merely wanted to make enquiry to find out the correctness of so-called information claimed to have been received from the Sales Tax Department and quantify the amount of escaped income at a later stage. The bona fide 'belief' towards escapement of income which is a mandatory pre-requisite is clearly absent in the present case. In the absence of such belief, the entire action of the AO is a complete non-starter and thus requires to be struck down. There are long line of judicial precedents delivered both by the Jurisdictional High Court as well as other High Courts for the proposition that re-assessment notice for mere verification or for conducting a fishing enquiry is not permissible in law notwithstanding that the return of income was not subjected the scrutiny under s. 143(3) of the Act. The action of the AO for invoking jurisdiction is thus inconsistent with the mandate of law and therefore requires to be quashed. It is well settled by plethora of judicial precedents, including Pr. CIT vs. Manzil Dineshkumar Shah 2018 (5) TMI 1176 - GUJARAT HIGH COURT the SLP against which has been dismissed 2019 (1) TMI 1284 - SC ORDER that reopening is not permissible merely to seek investigation of facts collected without holding at least prima facie belief towards escapement of income based on relevant material. The conditions set out for invocation of Section 147 of the Act have not been met in the instant case. Hence, the notice issued under section 148 of the Act is not backed by authority of law and consequently bad in law. The assessment under section 147 of the Act as a sequel to the illegal notice under section 148 of the Act is therefore a nullity and requires to be quashed. - Decided against revenue.

Summary

Issues:
Jurisdiction under section 147 of the Income Tax Act, 1961.

Detailed Analysis:

Jurisdiction under section 147 of the Income Tax Act:
The appeal was filed by the legal heir of the assessee against the order of the Commissioner of Income Tax (Appeals) concerning the assessment order passed by the Assessing Officer under section 143(3) of the Income Tax Act for AY 2002-03. The Assessing Officer initiated re-assessment proceedings under section 147 of the Act, leading to an enhancement in the assessed income. The CIT(A) dismissed the challenge to the jurisdiction under section 147. Subsequently, the ITAT set aside both the Revenue's appeal and the assessee's cross objections, directing the AO to consider the outcome of Sales Tax proceedings before determining the income. The AO completed the set aside assessment, and the assessee's appeal before the CIT(A) was dismissed. The ITAT, in a subsequent appeal, once again remanded the matter to the AO for considering the Sales Tax proceedings pending before the High Court. The High Court allowed the assessee's appeal, remanding the case back to the Tribunal for a decision on the issue of jurisdiction under section 147. The Tribunal found that the AO lacked the necessary belief for reopening the assessment, rendering the notice under section 148 invalid. Citing judicial precedents, the Tribunal held that the notice was a fishing expedition and did not meet the conditions for invoking section 147. Consequently, the assessment under section 147 was deemed a nullity, and the appeal of the assessee was allowed solely on the jurisdictional ground.

This comprehensive analysis of the judgment delves into the issues surrounding the jurisdiction under section 147 of the Income Tax Act, highlighting the procedural history, legal arguments, and the final decision rendered by the Tribunal.