2018 (8) TMI 2035 - AT - Income Tax

Tribunal voids assessment due to lack of reasons, upholds notice validity.

The Tribunal upheld the validity of the notice under Section 143(2) and rejected the assessee's argument regarding the date of furnishing the return. It ... Validity of reopening of assessment u/s 147 - as argued AO issued notice u/s 143(2) after furnishing of return of income by the assessee - HELD THAT:- As submitted by Ld D.R, it is an internal matter and hence without ascertaining the internal procedures adopted in this regard by the Income tax department, it may not be possible to draw any inferences. The assessee has not brought on record any material to show that the date of filing of return should not be considered to be the date on which the letter was filed with ASK counter or date of filing of return should be the date on which the same was received by AO in his hands. In this era of e-filing also, the date of filing of return of income is taken as the date on which the return of income is uploaded into the computer system of the department. In this view of the matter, we are of the view that the AO has issued notice u/s 143(2) of the Act after furnishing of return of income by the assessee. Accordingly we reject this ground of the assessee. Approval obtained by the AO from the Commissioner of Income tax is not in accordance with the mandate of provisions of sec. 151 - AO had not quantified the income that is claimed to have escaped the assessment. CIT has not applied his mind on this crucial aspect - in the case of Dulraj U Jain [2018 (7) TMI 2180 - BOMBAY HIGH COURT] while examining the validity of reopening of assessment has, inter alia, noted that the AO has not quantified the tax which has escaped assessment. Accordingly the Hon’ble Bombay High Court took the view that the reasons recorded do not indicate reasonable belief of Assessing Officer himself to issue notice u/s 148 of the Act. This aspect alone shows that the AO as well as Ld CIT has not applied their mind on the reasons recorded. In the reasons for reopening, the AO has referred to the affidavit filed by a person by mentioning wrong name. While the afffidavit was given by Shri Vinod Shenoy, the AO referred it as given by Shri Vijay Shenoy. This aspect would have come to the notice of Ld CIT, had he examined the reasons for the purpose of arriving at his satisfaction. As noticed that the Ld CIT(A) has simply written “Yes I am satisfied” against the question “Whether the Commissioner of Income tax2, is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for the issue of notice u/s 148”. Admittedly, the Ld CIT did not refer to the reasons recorded by the assessing officer. In the various cases discussed above, mere endorsement as “Yes I am satisfied” is considered to be a mechanical action. All these facts show that the Ld CIT did not apply his mind on the issue of reopening and has granted his approval in a mechanical manner. In our considered view, the various case laws discussed above support the contentions advanced by the assessee in this regard. Accordingly we hold that the reopening of assessment of the year under consideration is not valid, as the Ld CIT has accorded his approval in a mechanical manner. Accordingly we hold that the reopening proceedings vis-à-vis provisions of Sec. 151 are bad in law and the assessment has to be declared as void ab initio. Accordingly we set aside the orders passed by the tax authorities. Assessment order is barred by limitation - The assessee has raised this legal ground as the assessment order was handed over to the postal authorities only on 08-042015. We notice that the assessee has drawn inference that the assessing officer should have passed the assessment order only after 31-03-2015, as the order was handed over to the postal authorities only on 08-04-2015. In our view, the assessee has drawn only certain inferences on the basis of surmises and conjectures, as no credible material was brought on record to support the legal ground. Accordingly we do not find any merit in this legal ground of the assessee. Issues Involved:1. Validity of notice under Section 143(2) issued prior to the receipt of the return of income.2. Validity of notice under Section 148 without obtaining appropriate approval from the Commissioner of Income-tax.3. Timeliness of the assessment order under Section 153 of the Act.Detailed Analysis:1. Validity of Notice under Section 143(2):The assessee argued that the notice under Section 143(2) was issued before the return of income was received by the Assessing Officer (AO). The assessee filed a letter on 06-06-2014 requesting the AO to treat the original return filed on 30-10-2006 as the return in response to the notice under Section 148. The AO issued a notice under Section 143(2) on 16-06-2014, while the letter was received by the AO on 17-06-2014.The Tribunal held that the date of filing at the ASK counter (06-06-2014) is considered the date of furnishing the return. The AO issued the notice under Section 143(2) after this date, thus complying with the provisions. The Tribunal rejected the assessee's argument, emphasizing that the internal date stamp of 17-06-2014 was irrelevant.2. Validity of Notice under Section 148:The assessee contended that the approval from the Commissioner of Income-tax (CIT) was mechanical and lacked application of mind, rendering the assessment proceedings null and void. The AO reopened the assessment after four years, requiring the CIT's satisfaction on the reasons recorded by the AO.The Tribunal examined the internal processing sheet and noted that the CIT merely wrote 'Yes I am satisfied' without detailed reasons, which was deemed mechanical. The Tribunal referred to various case laws, including the Hon'ble Madhya Pradesh High Court's decision in S.Goyanka Lime & Chemicals Ltd., which held that mechanical approval without detailed reasons invalidates the reopening.The Tribunal concluded that the CIT did not apply his mind and granted approval mechanically, thus quashing the reopening proceedings and declaring the assessment void ab initio.3. Timeliness of the Assessment Order:The assessee argued that the assessment order was barred by limitation as it was handed over to the postal authorities on 08-04-2015, implying it was passed after 31-03-2015. The Tribunal found no credible material supporting this claim and rejected the ground, noting that the argument was based on inferences and conjectures.Conclusion:The Tribunal admitted the legal grounds raised by the assessee, quashed the reopening of assessment due to mechanical approval by the CIT, and declared the assessment void ab initio. The Tribunal did not find merit in the argument regarding the timeliness of the assessment order. Consequently, the appeal of the assessee was allowed, and the orders of the tax authorities were set aside.