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2022 (12) TMI 415 - AT - Income TaxReopening of assessment u/s 147 - reason to believe - new or tangible material which came to the possession of the AO - HELD THAT - Reassessment proceedings initiated by the AO u/s 147 of the Act are bad in law, as there was no new or tangible material which came to the possession of the AO subsequent to the issue of the intimation u/s 143 (1) of the Act and therefore, the jurisdictional condition i.e. existence of reason to believe is not satisfied in the present case. As regards learned DR s submission that arguments now raised in present appeal were not taken by the assessee before the learned CIT(A) and the same are also not covered in any of the grounds raised by the assessee, we are of the view that when the proceedings under 147 of the Act are challenged all the aspects pertaining to same gets covered and more particularly the aspect of existence of reason to believe , which is a precondition for initiation of any proceeding under section 147 of the Act. Accordingly, ground no. 1 raised in assessee s appeal is allowed.
Issues Involved:
1. Validity of reassessment proceedings initiated under section 147 of the Income Tax Act, 1961. 2. Examination of whether tangible material existed for reopening the assessment. 3. Compliance with procedural requirements for reopening the assessment. Issue-wise Detailed Analysis: 1. Validity of Reassessment Proceedings Initiated Under Section 147: The primary grievance of the assessee was against the reopening of the assessment under section 147 of the Income Tax Act, 1961. The assessee contended that the reassessment proceedings were invalid due to the absence of tangible material for initiating such proceedings. The Tribunal noted that the return filed by the assessee was processed under section 143(1) and not selected for scrutiny, with no order under section 143(3) passed. The reassessment was initiated based on the perusal of the return and annexures filed by the assessee, without any new or tangible material. The Tribunal emphasized that the term "reason to believe" should be based on some material that comes to the knowledge of the Assessing Officer before initiating proceedings under section 147. 2. Examination of Whether Tangible Material Existed for Reopening the Assessment: The Tribunal referred to various judicial precedents, including the Hon'ble Delhi High Court in CIT vs Orient Craft Ltd., and the Hon'ble jurisdictional High Court in Balakrishna Hiralal Wani vs ITO, which underscored the necessity of tangible material for reopening assessments. The Tribunal observed that in the present case, the reasons for reopening were based solely on the return filed by the assessee, without any new material. The Tribunal cited the Hon'ble Delhi High Court's interpretation that the expression "reason to believe" should apply uniformly, whether the assessment was made under section 143(3) or an intimation issued under section 143(1). The Tribunal concluded that the reassessment proceedings were initiated without any tangible material, rendering them invalid. 3. Compliance with Procedural Requirements for Reopening the Assessment: The Tribunal also examined the procedural compliance for reopening the assessment. It was noted that the reasons for reopening were provided to the assessee during the course of hearing, and the objections raised by the assessee were rejected by the Assessing Officer. The Tribunal highlighted that the existence of "reason to believe" is a jurisdictional condition precedent for initiating reassessment proceedings under section 147. The Tribunal concluded that the reassessment proceedings were bad in law due to the lack of new or tangible material and the failure to satisfy the jurisdictional condition of "reason to believe." Conclusion: The Tribunal allowed the appeal by the assessee on the jurisdictional issue, holding that the reassessment proceedings initiated under section 147 were invalid due to the absence of tangible material. Consequently, all other grounds raised in the cross appeals were rendered academic and infructuous. The appeal by the Revenue was dismissed, and the appeal by the assessee was partly allowed.
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