2017 (6) TMI 1113 - AT - Income Tax

Appeal allowed, reassessment voided for failure to meet statutory requirements.

The Tribunal allowed the appeal, declaring the notice issued under section 148 and all subsequent proceedings null and void ab initio due to failure to ... Validity of reopening of assessment - reasons to believe - Held that:- In the absence of anything in the reasons recorded to suggest that the income chargeable to tax which has escaped assessment is one lac rupees or more, the notice issued u/s 148 of the Act beyond four years of the end of the relevant assessment year, is invalid. This ratio, in my considered opinion, is applicable to the present case with full force and the ld. CIT(A) has erred in holding that the decisions in both these cases are distinguishable. For the foregoing discussion, respectfully following the decisions “in Mahesh Kumar Gupta” (2013 (4) TMI 444 - ALLAHABAD HIGH COURT) and “Amar Nath Agarwal” (2014 (10) TMI 8 - ALLAHABAD HIGH COURT ), finding force in the grievance raised by the assessee in this regard, the same is accepted. The CIT(A)’s order on this issue is reversed. The notice issued u/s 148 of the Act and all proceedings pursuant thereto, culminating in the order under appeal, are held to be null and void-ab initio. - Decided in favour of assessee. Issues Involved:1. Validity of initiation of proceedings under section 148 of the Income Tax Act.2. Validity of reasons recorded by the Assessing Officer (AO) for believing income had escaped assessment.3. Applicability of judgments cited by the assessee.4. Taxability of agricultural lands transferred to a partnership firm as short-term capital gains.Issue-wise Detailed Analysis:1. Validity of initiation of proceedings under section 148 of the Income Tax Act:The primary contention was whether the initiation of proceedings under section 148 was valid. The assessee argued that the notice under section 148 was issued after more than four years from the end of the relevant assessment year, and thus, should be barred by limitation as per section 149(1)(b) of the Act. The Tribunal noted that section 149(1)(b) stipulates that no notice under section 148 can be issued if four years have elapsed unless the income chargeable to tax which has escaped assessment amounts to, or is likely to amount to, Rs. 1 lakh or more. The Tribunal found that the reasons recorded by the AO did not specify that income amounting to Rs. 1 lakh or more had escaped assessment, which is a statutory requirement.2. Validity of reasons recorded by the AO for believing income had escaped assessment:The Tribunal examined the reasons recorded by the AO, which stated that the assessee introduced land as capital amounting to Rs. 30 lakhs to become a partner in a firm, and this capital contribution appeared to have escaped taxation. However, the Tribunal found that the reasons did not mention that the income chargeable to tax which had escaped assessment amounted to Rs. 1 lakh or more. The Tribunal emphasized that the reasons must be considered as they are, without supplementing them, and found that the AO did not possess the requisite information about the land's nature, location, acquisition details, or the capital gain amount, thus invalidating the initiation of proceedings.3. Applicability of judgments cited by the assessee:The assessee cited the judgments in 'Mahesh Kumar Gupta Vs. CIT' and 'Amar Nath Agarwal Vs. CIT' to support their contention. The Tribunal noted that in both cases, the Hon'ble Allahabad High Court had quashed reassessment proceedings because the reasons recorded by the AO did not indicate that the income escaping assessment was likely to be Rs. 1 lakh or more. The Tribunal found that these precedents were fully applicable to the present case and that the CIT(A) had wrongly distinguished them. The Tribunal held that the absence of a specific mention of Rs. 1 lakh or more in the reasons recorded rendered the notice under section 148 invalid.4. Taxability of agricultural lands transferred to a partnership firm as short-term capital gains:Although the assessee also contested the taxability of agricultural lands transferred to a partnership firm as short-term capital gains, the Tribunal found that since the initiation of proceedings under section 148 was invalid, there was no need to adjudicate this issue further.Conclusion:The Tribunal allowed the appeal, holding that the notice issued under section 148 and all subsequent proceedings were null and void ab initio due to the failure to meet the statutory requirements under section 149(1)(b). The Tribunal reversed the CIT(A)'s order and declared the reassessment proceedings invalid. The appeal was allowed in favor of the assessee.