Notice under section 148 and section 263 interference held invalid where AO's escaped-income theory relied on incorrect factual assumption

ITAT held that the AO's belief of escaped income was based on a wrong factual assumption - namely that funds deposited in a third-party company were routed to the taxpayer as share subscription - which the Pr. CIT found absent. Consequently, issuance of notice under section 148 and the reassessment dated 29.12.2017 were nullities, and the Pr. CIT's action under section 263 to interfere with that reassessment lacked jurisdiction. Decision in favor of the assessee.

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Issues Involved:
1. Delay in filing the appeal.
2. Assumption of jurisdiction under Section 263 of the Income Tax Act.
3. Validity of the reassessment proceedings initiated under Section 147/148 of the Act.
4. Examination of the factual basis for reopening the assessment.
5. Authority of the Principal Commissioner of Income Tax (Pr. CIT) to interfere with the assessment order.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal was filed by the assessee with a delay of 210 days. The delay was attributed to restrictions imposed due to the Covid-19 pandemic. After hearing both sides, the Tribunal found a reasonable cause for the delay and condoned it, admitting the appeal for hearing.

2. Assumption of Jurisdiction under Section 263 of the Income Tax Act:
The assessee challenged the invocation of revisional jurisdiction under Section 263 by the Pr. CIT, arguing that the essential pre-conditions were not satisfied. The Pr. CIT had interdicted the order of the AO passed under Section 144/147, which itself was claimed to be a nullity. The AO had reopened the assessment based on information about high-value deposits in the bank account of M/s Miracle Commodities Pvt. Ltd., which were allegedly routed to the assessee. The Tribunal noted that the Pr. CIT's order acknowledged that the factual basis for reopening the assessment was erroneous. Consequently, the Tribunal held that the Pr. CIT's order was also a nullity.

3. Validity of the Reassessment Proceedings Initiated under Section 147/148:
The Tribunal examined whether the AO had the requisite jurisdiction to reopen the assessment. The AO had issued a notice under Section 148 based on information that large amounts of money were routed to the assessee through M/s Miracle. The Tribunal found that the AO's belief of escapement of income was based on erroneous facts, as acknowledged by the Pr. CIT. Therefore, the AO's action to initiate reassessment proceedings was without jurisdiction, rendering the reassessment order dated 29.12.2017 a nullity.

4. Examination of the Factual Basis for Reopening the Assessment:
The Tribunal scrutinized the factual basis for reopening the assessment. The AO's reason to believe escapement of income was based on information about high-value deposits in M/s Miracle's bank account, which were allegedly routed to the assessee. However, the Pr. CIT's order concluded that the alleged transactions did not reach the assessee company directly or indirectly. This finding invalidated the AO's assumption of jurisdiction for reopening the assessment.

5. Authority of the Pr. CIT to Interfere with the Assessment Order:
The Tribunal held that since the reassessment order itself was a nullity due to lack of jurisdiction, the Pr. CIT could not validly exercise revisional jurisdiction under Section 263. The Tribunal relied on judicial precedents to support the position that the validity of the primary proceedings (reassessment) could be challenged in collateral proceedings (revision under Section 263). Consequently, the Tribunal quashed the Pr. CIT's order as null in the eyes of law.

Conclusion:
The Tribunal allowed the assessee's appeal, quashing the Pr. CIT's order under Section 263 and holding that the reassessment proceedings initiated by the AO were without jurisdiction and thus invalid.

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