Tribunal sets aside assessment order due to lack of grounds for reopening - unlawful notice issued under section 148

The Tribunal found that the Assessing Officer lacked sufficient grounds to reopen the assessment solely based on received information without independent verification. The Tribunal emphasized that reopening an assessment must be supported by a reason to believe income has escaped assessment, not mere suspicion. Citing precedents, the Tribunal held that the notice issued under section 148 was unlawful, leading to the setting aside of the assessment order. Consequently, the appeal was allowed, and the assessment order was quashed on 26.04.2019 without delving into the merits of the case.

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Issues:
Challenge to the validity of notice u/s 148 of the Income-tax Act, 1961 and jurisdiction of the assessment order under section 147. Challenge to additions on merits.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax [Appeals] pertaining to the assessment year 2013-14. The assessee challenged the validity of the notice issued under section 148 of the Income-tax Act, questioning the jurisdiction of the assessment order under section 147. Additionally, the assessee challenged the additions made on merits. The Assessing Officer had received information regarding the payment of capitation fee/donation in cash to a medical college over and above the regular fees. The notice u/s 148 was issued based on this information. The reasons for reopening the assessment indicated the receipt of cash donations by the parents of students for admission to medical courses. The Tribunal noted that the Assessing Officer could have requested information under section 133(6) instead of reopening the assessment solely based on the received information.

The Tribunal observed that the Assessing Officer did not independently apply his mind and merely relied on information from the Investigation Wing. It was noted that reopening an assessment cannot be done solely on suspicion; there must be a reason to believe that income has escaped assessment. The Tribunal cited a case where the Delhi High Court observed that the initiation of reopening the assessment without examining the filed return was erroneous. The Tribunal also referred to a case where the assessment was reopened for verification purposes, which was deemed invalid as it lacked a crucial link between the information and the belief of income escapement.

In light of the judicial decisions and the facts of the case, the Tribunal held that the assumption of jurisdiction by issuing the notice u/s 148 was unlawful. Consequently, the assessment order was set aside, and Ground Nos. 1 to 4 of the appeal were allowed. Since the assessment order was quashed, the Tribunal did not delve into the merits of the case. As a result, the appeal filed by the assessee was allowed, and the assessment order was pronounced to be quashed on 26.04.2019.

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