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2022 (11) TMI 1117 - HC - Income TaxReopening of assessment u/s 147 - Reasons to believe - whether the AO was having any reason to believe that the Assessee had escaped assessment? - HELD THAT - As in the case Sheetal Dushyant Chaturvedi 2021 (9) TMI 833 - SC ORDER appeal filed by the department was dismissed against the order of High Court who held that where reasons supplied by Assessing Officer for reopening Assessee assessment only referred to a need to verify documents and reasons supplied by assessing officer did not show that income has escaped assessment. There cannot be any re-assessment for a reason to suspect and re-assessment is only to be done if the AO has reasons to believe that the Assessee has escaped assessment. Without going into the other argument of the petitioner and merits of the case; the instant appeal requires to be dismissed on the sole ground that the Assessing Officer was not having any reason to believe for initiating re-assessment which is clear from the recorded reason to believe itself. Tribunal has not committed any error in applying the judgment passed in the case of Dinesh Kurmar Sah 2018 (5) TMI 1176 - GUJARAT HIGH COURT .Consequently, the question of law framed in this case is answered against the department.
Issues Involved:
1. Sufficiency of the "reasons to believe" recorded by the Assessing Officer under Section 148 read with Section 147 of the Income Tax Act for re-assessment. 2. Whether the impugned order passed by the learned ITAT is perverse in the eye of law. Issue-wise Detailed Analysis: 1. Sufficiency of the "reasons to believe" recorded by the Assessing Officer under Section 148 read with Section 147 of the Income Tax Act for re-assessment: The core issue revolves around whether the Assessing Officer (AO) had sufficient "reasons to believe" that income chargeable to tax had escaped assessment for the relevant assessment year. The AO had reopened the assessment based on information received from the Deputy Director of Income Tax (Investigation), Dhanbad, indicating that the Respondent Assessee had sold 35 acres of land amounting to Rs. One crore but had not filed an income tax return for the A.Y. 2009-10. The AO recorded that these transactions "need to be verified." The court emphasized that the law requires a clear "reason to believe" and not merely a "reason to suspect." The reasons recorded by the AO indicated a need for verification, which the court found insufficient for initiating re-assessment proceedings. The court cited precedents such as the Supreme Court's decision in Income Tax Officer vs. Lakhmani Mewal Das, which clarified that the AO's belief must be held in good faith and should not be a mere pretense. The court also referred to its own decision in Naveen Kumar Jaiswal vs. Income Tax Department, reiterating that reasons must be clear, unambiguous, and not supplemented by oral submissions or affidavits. 2. Whether the impugned order passed by the learned ITAT is perverse in the eye of law: The ITAT had quashed the assessment order on the grounds that the notice under Section 148 was issued merely for verification purposes, which is not permissible under the law. The Revenue argued that the ITAT erred by relying on a judgment from the Gujarat High Court in the case of Income Tax vs. Manzil Dinesh Kumar Shah, where the notice was quashed for being issued solely for verification. The court upheld the ITAT's decision, finding no error in applying the precedent. It reiterated that reassessment proceedings cannot be initiated for verification purposes alone, as it amounts to a "fishing and roving inquiry." The court also referenced the Supreme Court decision in Principal Commissioner of Income-tax vs. Sheetal Dushyant Chaturvedi, which dismissed an appeal against a High Court order quashing a notice that only referred to the need to verify documents. Conclusion: The court concluded that the AO lacked sufficient "reasons to believe" for initiating re-assessment proceedings under Sections 147 and 148 of the Income Tax Act. The reasons recorded by the AO indicated a need for verification, which is insufficient under the law. Consequently, the ITAT's order quashing the assessment was upheld, and the appeal by the Revenue was dismissed. The question of law was answered against the department, confirming that the initiation of re-assessment proceedings in this case was not legally sustainable.
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