2022 (5) TMI 1170 - AT - Income Tax

Validity of Reopening of assessment u/s 147 - independent enquiry of the information or formation of belief available on record or not? - AR emphasized that the A.O has issued the notice based on the observations of the Hon ble ITAT in the case of M/s industrial estates Pvt Ltd 2013 (11) TMI 303 - ITAT MUMBAI and no independent enquiry was conducted for recording the reasons - HELD THAT - A.O. has issued the notice in the year 2014 and the Ld.AR has raised one of the objections that no satisfaction of the Jt.CIT was obtained u/sec151 of the Act before the issue of impugned notice and the prior sanction of appropriate authority. Since the issue pertains to A.Y 2007-08, the revenue has expressed the difficulty in providing the records/material to verify the factual aspects on sanctioning authority. We find that the assessee has filed the return of income for the A.Y.2007-08 in the status of A.O.P. with taxable income of Rs.Nil in compliance to notice u/sec 148 - AR demonstrated that the income is distributed among the six Joint Lessees with the percentages referred in the assesseement order and the shares are determinate and known, which is not disputed by the revenue. Further they have offered the share of income of joint lessees in their hands/assessments with the jurisdictional income authorities. Reopening is on the wrong assumption of facts and the information received from another assessing officer would not by itself be the basis to have a belief that the income has escaped assesseement . Accordingly, we find the reassessment is bad in law and quash the assessment order passed u/s 143(3) r.w.s 147 of the Act. Since the legal issue is decided in favour of the assessee and again adjudicating on merits becomes academic and are left open and we allow the grounds of appeal in favour of the assessee.

Issues Involved:

1. Validity of reassessment proceedings.
2. Whether the notice issued under Section 148 of the I.T. Act, 1961, was void ab initio.
3. Whether the assessment order passed under Section 147 read with Section 150 of the I.T. Act, 1961, was void ab initio due to lack of opportunity of being heard.
4. Whether the notice issued under Section 148 was void ab initio due to lack of satisfaction of the Joint Commissioner under Section 151(2) of the I.T. Act, 1961.
5. Whether the status of the appellant was correctly held as an "Association of Persons" instead of "Joint Owners."
6. Legitimacy of additions made by the lower authorities in the hands of the appellant.

Detailed Analysis:

1. Validity of reassessment proceedings:
The assessee challenged the validity of reassessment proceedings initiated under Section 147 of the I.T. Act, 1961. The primary contention was that the Assessing Officer (A.O.) issued the notice based on the observations of the Income Tax Appellate Tribunal (ITAT) in another case without conducting an independent enquiry. The tribunal noted that the A.O. relied solely on the findings of another assessing officer and did not form an independent belief. The tribunal found that the reopening was based on wrong assumptions and quashed the reassessment order, deeming it invalid.

2. Void ab initio notice under Section 148:
The assessee argued that the notice issued under Section 148 was void ab initio as no material with a live link to the formation of belief was available on record prior to the issuance of the notice. The tribunal observed that the A.O. issued the notice based on the ITAT's observations in another case, which did not constitute sufficient grounds for reopening the assessment. Consequently, the notice was deemed void ab initio.

3. Void ab initio assessment order under Section 147 read with Section 150:
The assessee contended that the assessment order was void ab initio as no opportunity of being heard was granted, violating Explanation 3 below Section 153 of the I.T. Act, 1961. The tribunal noted that the A.O. did not provide the assessee with an opportunity to present their case before passing the reassessment order, rendering the order void ab initio.

4. Lack of satisfaction of Joint Commissioner under Section 151(2):
The assessee claimed that the notice issued under Section 148 was void ab initio as no satisfaction of the Joint Commissioner was obtained prior to issuing the notice. The tribunal acknowledged the difficulty in verifying the factual aspects due to the time elapsed but emphasized that the absence of prior sanction from the appropriate authority invalidated the notice.

5. Status of the appellant as "Association of Persons":
The assessee argued that the lower authorities erred in holding their status as an "Association of Persons" (AOP) instead of "Joint Owners" of separately identifiable properties. The tribunal noted that the assessee filed returns in the status of AOP for subsequent assessment years, and the income was distributed among the joint lessees according to their respective shares. The tribunal found no merit in the lower authorities' classification of the assessee's status and upheld the assessee's contention.

6. Legitimacy of additions made by the lower authorities:
The assessee contested the additions made by the lower authorities, including Rs. 13,39,433/- and Rs. 25,00,015/- in the hands of the appellant, arguing that they were neither the legal nor beneficial owners of the leased properties. The tribunal examined the facts and concluded that the additions were based on incorrect assumptions and contrary to the accepted factual position. The tribunal quashed the reassessment order, rendering the additions infructuous.

Conclusion:
The tribunal allowed the appeal filed by the assessee, quashing the reassessment order passed under Section 143(3) read with Section 147 of the I.T. Act, 1961, and dismissed the revenue's appeal as infructuous. The reassessment proceedings were deemed invalid, and the additions made by the lower authorities were rendered academic. The tribunal's decision was pronounced in the open court on 09.05.2022.

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