2021 (12) TMI 826 - HC - Income Tax

Validity of reopening of assessment u/s 147 - Eligible reasons to believe - no sanction as contemplated under Section 151 - HELD THAT - On bare perusal of the reasons it is quite evident that the reasons are based on totally erroneous and in correct facts and without non application of mind. The fact is the return of income for A.Y. 2012-13 filed by petitioner on 24th September, 2012 has been assessed under Section 143(3) of the Act and the Assessment Order dated 31st March, 2015 has been passed - AO has proceeded on erroneous factual basis that the return of income was only processed under Section 143(1) - this displays total non application of mind. In fact, petitioner s allegations that Respondent No.1 has sought to re-open the assessment on incorrect factual position that the return of income was only processed under Section 143(1) of the Act has not even been denied in the affidavit in reply which is filed by the same Assessing Officer. In paragraph no.2 of the affidavit in reply which is in response to paragraph no.1 and 2 of the petition, Respondent No.1 simply says that these are factual in nature and the notice under Section 148 dated 26th March, 2019 and the order disposing the objections and the notice dated 22nd October, 2019 are issued in pursuance of the objective of completing reassessment in accordance with the procedures laid down. On this ground alone, the notice dated 26th March, 2019 has to be set aside. One wonders whether the sanctioning authority under Section 151 also would have even applied his mind because the reasons recorded as noted above itself displays non application of mind by the Assessing Officer. Therefore, either no sanction as contemplated under Section 151 of the Act has been obtained or the same was granted mechanically without application of mind to the facts because if only the Assessing Officer had placed the entire file before the sanctioning authority he would have pointed out the error in the reasons for re-opening. - Decided in favour of assessee.

Summary

Issues:
Impugning notice under Section 148 of the Income Tax Act, 1961 and order disposing objections to re-opening.

Analysis:
The petitioner challenged the notice issued under Section 148 of the Income Tax Act, 1961, and the order disposing of objections to the re-opening on various grounds, including non-application of mind by the Assessing Officer. Upon reviewing the petition, documents, respondent's reply, and hearing both parties, the court found that the reasons for re-opening were based on erroneous and incorrect facts, displaying a clear lack of application of mind by the Assessing Officer. The court noted that the return of income for the relevant assessment year had been assessed under Section 143(3) of the Act, contrary to the Assessing Officer's claim that it was only processed under Section 143(1), indicating a significant error in factual understanding. The court highlighted that the respondent failed to deny the petitioner's allegation regarding the incorrect factual basis for re-opening in the affidavit in reply, further emphasizing the lack of proper consideration in the decision-making process.

The court also addressed the issue of the petitioner's request for a copy of the sanction under Section 151 of the Act, which was not provided despite repeated requests. The court observed that the respondent did not deny this averment in the affidavit in reply and failed to produce the sanction obtained, leading to an adverse inference against the respondent. This raised concerns about whether the sanctioning authority under Section 151 of the Act had applied its mind, given the evident lack of application of mind by the Assessing Officer in the reasons recorded for re-opening. The court suggested that either no proper sanction was obtained or it was granted mechanically without due consideration of the facts, further highlighting procedural irregularities in the re-assessment process.

Consequently, the court allowed the petition and issued a writ quashing the notice under Section 148 dated 26th March 2019, the order disposing objections dated 22nd October 2019, and the notice/summons dated 22nd October 2019. The court's decision was based on the grounds of incorrect factual basis for re-opening, failure to provide the requested sanction details, and the overall lack of proper application of mind in the re-assessment process.