2022 (8) TMI 796 - AT - Income Tax

Tribunal voids assessment order due to incorrect assumption, emphasizes accurate facts in reassessment.

The Tribunal allowed the additional ground concerning the incorrect assumption of non-filing of the return, leading to the quashing of the notice under ... Reopening of assessment under section 147 and notice under section 148 - reopening vitiated by recording of wrong facts - assumption of jurisdiction - reassessment order void ab initio - verification of alleged escapement against the filed return - applicability of Jet Airways principle on scope of reasons for reopeningReopening vitiated by recording of wrong facts - reopening of assessment under section 147 and notice under section 148 - verification of alleged escapement against the filed return - assumption of jurisdiction - reassessment order void ab initio - Whether the notice issued under section 148/147 was invalid because the Assessing Officer recorded the factual premise of non-filing of return when the assessee had in fact filed the return. - HELD THAT: - The Tribunal examined the reasons recorded by the Assessing Officer and the material on record. The reasons referred to AIR information showing purchase of immovable property and stated that no return was visible on the system; the Assessing Officer therefore proceeded on the basis that no return under section 139 had been filed and that reassessment under section 147 was warranted. The assessee, however, produced the acknowledgement and computation evidencing filing of the return on 19.03.2013, before the reasons were recorded on 27.03.2019. Because the Assessing Officer initiated reopening on the basis of the erroneous factual premise that no return had been filed, the Tribunal held that the assumption of jurisdiction was founded on a wrong fact. Relying on analogous authority where notices were set aside for the same defect, the Tribunal concluded that had the Assessing Officer noted the correct fact of filing he would have had to verify the alleged escapement against the return and could not have validly proceeded on the recorded premise. Consequently the notice and the reassessment order were held legally untenable. [Paras 8, 10]Notice under section 148/147 quashed as issued on a wrong factual premise; reassessment order and consequential appellate order held void ab initio.Final Conclusion: The Tribunal quashed the reassessment notice and set aside the assessment and the CIT(A)'s order as void ab initio on the ground that reopening was based on the incorrect factual finding of non-filing of return; appeal partly allowed. Issues Involved:1. Admissibility of additional grounds of appeal.2. Validity of the reopening of the assessment.3. Justification of the addition made by the Assessing Officer (AO) on grounds different from those stated in the reopening notice.4. Legality of reopening based on incorrect facts regarding the filing of the return.Detailed Analysis:1. Admissibility of Additional Grounds of Appeal:The appellant filed additional grounds of appeal, which were considered legal in nature and derived from existing material on record. The respondent agreed to the admission of these additional grounds. The Tribunal admitted the additional grounds and proceeded to hear arguments on them.2. Validity of the Reopening of the Assessment:The appellant argued that the reopening of the assessment was initiated to verify an investment in property amounting to Rs. 51,95,000/-. However, the AO made an addition of Rs. 10,70,000/- on the grounds that the appellant could not explain the source of deposits for the property investment. The appellant contended that since the AO did not make any addition based on the initial reason for reopening, the assessment order should be considered void ab initio, referencing the case law of CIT vs. Jet Airways Ltd. 331 ITR 236.3. Justification of the Addition Made by the AO:The appellant's additional grounds included that the addition of Rs. 10,70,000/- was not based on the belief of escapement of income initially formed by the AO. The AO had initially reopened the case based on an investment in immovable property, but the addition was confirmed as unexplained credit, which was different from the original reason for reopening. The Tribunal found that the AO had indeed made an addition on a different basis than what was initially recorded for reopening, making the assessment order void ab initio.4. Legality of Reopening Based on Incorrect Facts:The appellant filed a return of income on 19.03.2013, but the AO initiated reopening on the incorrect assumption that no return had been filed. The Tribunal reviewed the material on record and found that the appellant had indeed filed the return, and the AO's assumption was incorrect. The Tribunal referenced similar cases, including Mumtaz Haji Mohammad Memon vs. ITO and Sagar Enterprises vs. ACIT, where reopening based on incorrect facts was held to be bad in law.The Tribunal also cited the case of Shri Sunil Kumar Rastogi HUF vs. ITO, where the Hon'ble Allahabad High Court quashed a notice issued under similar circumstances. The Tribunal concluded that the AO's reopening of the case based on the incorrect fact of non-filing of the return was not legally tenable. Consequently, the notice issued under section 147 was quashed, and the assessment order was declared void ab initio.Conclusion:The Tribunal allowed the additional ground regarding the incorrect assumption of non-filing of the return, quashing the notice under section 147 and declaring the assessment order void ab initio. As a result, other grounds of appeal were not adjudicated, and the appeal was partly allowed. The judgment emphasized the importance of accurate facts in the reopening of assessments and upheld the legal precedents protecting taxpayers from incorrect reassessment proceedings.