2023 (4) TMI 886 - AT - Income Tax

Validity of Reassessment u/s 147/144 - non assuming jurisdiction as per law and without complying with the mandatory conditions u/s 147 to 151 - tangible material to initiate reopening - Borrowed satisfaction - non applIcation of mind by AO - HELD THAT - There was AIR information available with the AO in the form tangible material and thereafter the AO proceeded to initiate reassessment proceedings and to issue notice u/s. 148 of the Act to the assessee. Analysis of reasons recorded by the AO clearly shows that except AIR information there was nothing else in the hands of AO at the time of initiating reassessment proceedings and the AO without applying mind to the information and without any further verification from the bank prosecute to record he had reason to believe that income has escaped assessment for A.Y. 2010-11. As decided in Bir Bahdur Singh Sijwali 2015 (2) TMI 60 - ITAT DELHI we are inclined to hold that mere AIR information of cash deposit without any other information and verification or examination by the AO the AO is not entitle to assume valid jurisdiction to initiate reassessment proceedings u/s. 147 of the Act and issue notice u/s. 148 of the Act. Decided in favour of assessee.

Summary

Issues involved:
The issues involved in the judgment are the validity of reassessment proceedings under section 147/144 without proper jurisdiction and compliance with mandatory conditions, and the addition of Rs. 15,50,200 allegedly as undeclared cash deposit in the bank account.

Validity of Reassessment Proceedings:
The appeal challenged the initiation of reassessment proceedings under section 147/144 without proper jurisdiction and compliance with mandatory conditions. The Assessee Representative argued that the Assessing Officer (AO) proceeded to initiate reassessment proceedings without application of mind and based on incorrect information. It was contended that the AO did not have valid jurisdiction as required by law and failed to obtain necessary documents before issuing the notice under section 148. The Senior DR supported the AO's actions, emphasizing that the AO only needed a prima facie reason to believe income had escaped assessment. The Tribunal noted that the AO, after obtaining approval, issued the notice under section 148 based on tangible material from AIR information. The Tribunal found that the AO did not have sufficient grounds to assume jurisdiction for reassessment proceedings, as the reasons recorded were based solely on AIR information without further verification. Citing a previous judgment, the Tribunal held that mere AIR information without additional verification did not entitle the AO to initiate reassessment proceedings under section 147. Consequently, the initiation of reassessment proceedings and all related orders were deemed unsustainable and quashed.

Addition of Undeclared Cash Deposit:
Regarding the addition of Rs. 15,50,200 as an allegedly undeclared cash deposit in the bank account, the Assessee Representative argued that the AO incorrectly assumed the bank account belonged solely to the assessee and proceeded with reassessment on incorrect premises. The AO failed to verify the ownership and deposit details of the bank account before initiating reassessment proceedings. The Tribunal observed that the AO did not consider all relevant facts and made incorrect assumptions about the ownership and deposit amounts in the bank account. The Tribunal found that the AO's actions were not in accordance with the principles of natural justice and lacked proper verification of facts. As the reassessment proceedings were quashed due to lack of valid jurisdiction, the Tribunal did not adjudicate on the merits of the addition of Rs. 15,50,200 as it became academic. Ultimately, the appeal was partly allowed, and all proceedings related to the reassessment were quashed.