2022 (9) TMI 295 - AT - Income Tax

Reopening of assessment u/s 147 - validity of the jurisdiction that was assumed by the A.O u/s.147 - n on-application of mind by AO - Reopening initiated as assessee had not filed his return of income for the year under consideration - HELD THAT - Considering the reasons on the basis of which the case of the assessee was reopened u/s.147 we find, that as stated by the Ld. AR, and rightly so, the same are based on a fallacious and misconceived fact that the assessee had not filed his return of income for the relevant A.Y.2012-13. The very basis for reopening of the case of the assessee by the A.O u/s.147 of the Act is clearly fallacious which proves beyond doubt a non-application of mind by him to the material available on record on the basis of which the impugned belief that the income of the assessee chargeable to tax had escaped assessment had been arrived at by him. Assessee had made cash deposits and purchased immovable property as stated in the reasons to believe , but the very observation that the assessee had not filed his return of income for the year under consideration i.e. A.Y.2012-13 irrefutably evidences a clear non-application of mind by the A.O who had in a mechanical manner without even doing the bare minimum i.e. referring to and consulting the assessment record of the assessee which was lying available with him had taken recourse to proceedings u/147. Thus a strong conviction that as the very basis for assumption of jurisdiction by the A.O for taking recourse to proceedings u/s.147 of the Act is found to be incorrect and fallacious, therefore, the consequential assessment so framed by him u/s.143(3)/147 cannot be sustained and is liable to be quashed on the said could itself - Grounds of appeal raised by the assessee are allowed.

Summary

Issues:
Jurisdiction under Sec.147, Applicability of section 44AD, Addition under section 44AD, Validity of notice u/s.148, Grounds of appeal.

Jurisdiction under Sec.147:
The appeal challenged the jurisdiction assumed by the A.O under Sec.147, based on the belief that the assessee had not filed the return of income for A.Y. 2012-13. The assessee contended that the original return was indeed filed on 31.03.2013, disclosing an income of Rs.5,04,500. The assessment records revealed that the return was filed on 31.03.2014 for A.Y. 2012-13. The reasons to believe for reopening the case were found to be flawed as they incorrectly stated that the assessee had not filed the return. The Tribunal concluded that the A.O had not applied his mind properly and quashed the assessment under Sec.143(3)/147.

Applicability of section 44AD:
During the assessment, the A.O observed income from various sources, including plying heavy goods vehicles and transport booking work under the deeming provisions of section 44AE and 44AD. The assessee claimed not to maintain books of accounts due to opting for deeming provisions. The A.O noted substantial deposits in the bank account, questioning the declared income. Despite the assessee's explanation, the A.O estimated income at Rs.13,30,828, rejecting the claim under section 44AE. The CIT(Appeals) upheld this addition, leading to the appeal. However, due to the jurisdictional issue, the Tribunal did not delve into the merit of this addition.

Addition under section 44AD:
The A.O made an addition of Rs.7,57,428 under section 44AD, which the CIT(Appeals) sustained. The assessee contested this addition, arguing that the income was disclosed as per the deeming provisions of section 44AE/44AD. However, the A.O estimated income based on bank deposits, leading to the final determination of income at Rs.13,30,828. The Tribunal did not address this specific addition due to quashing the assessment on jurisdictional grounds.

Validity of notice u/s.148:
One of the grounds of appeal challenged the validity of the notice issued under Sec.148. The Tribunal did not delve into this issue as the assessment was quashed based on the incorrect assumption of jurisdiction by the A.O.

Grounds of appeal:
The appeal included various grounds challenging the CIT(Appeals) order, such as jurisdiction, applicability of sections 44AE/44AD, addition under section 44AD, and validity of notice u/s.148. The Tribunal allowed the appeal primarily on the jurisdictional issue, leading to the quashing of the assessment under Sec.143(3)/147. Other grounds were not addressed due to the jurisdictional flaw.