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of <h1>Notices under Sections 147/148 quashed for lack of reasons and no new material after completion under section 143(1); s.23(2)(b) misread</h1> HC quashed notices issued under Sections 147/148, holding the reasons for reopening were ex facie baseless and showed no application of mind or reference ... Validity of Reopening of an Assessment under Sections 147/148 - Earlier returns were processed u/s 143(1) - reasons to believe for initiating reassessment - wrongly valued perquisite on account of rent free accommodation and annual Letting Value - annual letting value of the house property due to a claim of interest expenditure on a housing loan - HELD THAT:- The reasons which have been recorded seeking reopening of the assessment, and as reproduced above show that there is no application of mind by the Assessing Officer which can be said to be the mind of a reasonable person to arrive at a conclusion, which has been arrived at in view of the reasons recorded. Firstly, the reasons do not refer to any material which has come to the notice of the officer subsequent to the finalization of the assessment under Section 143(1). Also, it is not the case that the assessee has concealed any material particulars or any facts from the department. It is not understood as to how the Assessing Officer has arrived at the conclusion that in the relevant assessment year the assessees were in occupation of rent free accommodation at New Delhi from their employers. So far as the issue of non-disclosure of the annual letting value of their flat at Shipra Sun City, it is quite clear that Section 23(2)(b) clearly provided that the annual letting value has to be taken as nil when the house property cannot be occupied by the assessee by reason of the fact that owing to his employment he is stationed at any other place and there he resides in a building not belonging to him. Again, in the reasons recorded seeking reopening of the assessment, the officer has failed to disclose as to how he had come to the finding and on the basis of which materials. Clearly, it is not a finding which any reasonable man could have been arrived at in the facts and circumstances of the case. In fact, it is for this reason that the Assessing Officer has not stated that what are the new materials in this regard which has come into his possession for seeking of reopening of the assessment and how the assessee has concealed any facts or particulars in his return of income. The reasons recorded are therefore ex facie without any foundation and are in fact wholly baseless conclusion. Accordingly, we quash the notices issued against the petitioners under Sections 147/148 of the Act. We also quash the letter/questionnaire to the extent it contains fishing and roving enquiries wholly disconnected with the two issues of alleged escapement of income under Sections 147/148 of the Act. Issues Involved:Reopening of assessment under Sections 147/148 based on incorrect valuation of perquisite on rent-free accommodation and alleged non-disclosure of annual letting value of house property.Analysis:1. Incorrect Valuation of Perquisite on Rent-Free Accommodation:The petitioners, husband and wife working as doctors, filed a return of income for the assessment year 2005-2006, which was processed under Section 143(1) of the Income Tax Act, 1961. Subsequently, they were issued notices under Sections 147/148 for reopening the assessment. The reasons for reopening included the Assessing Officer's belief that the petitioners undervalued the perquisite of rent-free accommodation provided by their employer. The officer contended that the perquisite should have been valued at 10% of the petitioners' salary, leading to an alleged under-disclosure of income. However, the senior counsel for the petitioners argued that the reasons for reopening were misconceived and lacked new material to justify reassessment. The counsel highlighted that the petitioners had shifted from the mentioned accommodation in 2001 and were not in Delhi during the relevant period. The counsel demonstrated how the perquisite was correctly calculated based on the employer's TDS certificate and Rule 3 of the Income Tax Rules, 1962. The court found that the reasons for reopening lacked substance and were devoid of any new material post the original assessment, leading to the quashing of the notices.2. Alleged Non-Disclosure of Annual Letting Value:Another reason for reopening the assessment was the alleged non-disclosure of the annual letting value of the house property due to a claim of interest expenditure on a housing loan. The counsel for the petitioners argued that as the petitioners were posted in Raipur, the annual let-able value was nil as per Section 23(2)(b) of the IT Act. The counsel contended that this was a case of harassment as the officer failed to provide any basis for the reopening based on this issue. The court agreed with the petitioners, noting that the officer's conclusions lacked foundation and were baseless. The officer did not demonstrate any new material or concealment of facts by the petitioners, leading to the quashing of the notices and the associated questionnaire containing irrelevant inquiries.In conclusion, the High Court allowed the writ petition, quashing the notices under Sections 147/148 and the questionnaire. The court imposed costs on the Revenue, emphasizing the lack of justification for the reassessment based on the incorrect valuation of perquisite and the alleged non-disclosure of the annual letting value.
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