Appeal allowed for reassessment case emphasizing legal procedures & "reasons to believe." Order invalidated if reasons not provided.

The Tribunal allowed the appeal for statistical purposes, emphasizing the importance of adhering to legal procedures in reassessment cases. The matter was remanded to the CIT(A) to verify if the Assessing Officer failed to provide the "reasons to believe" to the assessee. If confirmed, the assessment order would be invalidated. The Tribunal referenced legal precedents highlighting the necessity of communicating reasons for reopening cases. The order was pronounced on 30th November 2022.

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Issues Involved:
1. Legality of the order passed under Sections 147/143(3) of the Income-tax Act, 1961.
2. Validity of reliance on the estimated report of the registered valuer by the CIT(A).
3. Reference to the DVO without rejecting the books of account.
4. Sustaining estimated addition of Rs.2,00,290/- without corroborative evidence.
5. Proper procedure for initiation of proceedings under Section 147 of the Act.

Detailed Analysis:

1. Legality of the Order Passed Under Sections 147/143(3) of the Income-tax Act, 1961:
The assessee challenged the order passed by the CIT(A) under Sections 147/143(3) of the Act, arguing that it was flawed both in law and on facts. The Tribunal admitted the additional ground of appeal raised by the assessee, which questioned the initiation and completion of the assessment proceedings under Section 147 without the A.O communicating the "reasons to believe" for reopening the case. The Tribunal highlighted the importance of providing these reasons, referencing the Hon'ble Supreme Court's decision in the case of National Thermal Power Company Ltd. Vs. CIT, which supports the admission of additional grounds involving purely legal questions.

2. Validity of Reliance on the Estimated Report of the Registered Valuer by the CIT(A):
The assessee contended that the CIT(A) erred by relying on an estimated report from a registered valuer, which was obtained by the survey team without any statutory provision authorizing such an action. The Tribunal noted that the CIT(A) had previously held the reference to the DVO as contrary to law in an earlier assessment order, making the reliance on the registered valuer's report legally questionable.

3. Reference to the DVO Without Rejecting the Books of Account:
The assessee argued that the reference to the DVO was made without rejecting the books of account, which is contrary to legal principles. The Tribunal acknowledged this contention, emphasizing that reliance on the estimated report without detecting any suppression in the investment recorded in the books of account was legally unsound.

4. Sustaining Estimated Addition of Rs.2,00,290/- Without Corroborative Evidence:
The assessee challenged the addition of Rs.2,00,290/- sustained by the CIT(A) as it was based purely on estimations without any corroborative evidence. The Tribunal found merit in this argument, noting the lack of justification for ignoring the investment recorded in the books of account.

5. Proper Procedure for Initiation of Proceedings Under Section 147 of the Act:
The Tribunal focused on whether the A.O had provided the "reasons to believe" for reopening the assessment to the assessee, as requested. The Tribunal found that the A.O's failure to provide these reasons deprived the assessee of the right to object to the reopening of the case. This failure was seen as a violation of the principles laid down by the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. Vs. ITO & Ors., which mandates that the assessee must be provided with the reasons for reopening and given an opportunity to file objections.

The Tribunal referred to various judicial pronouncements, including the Hon'ble High Court of Bombay's decision in Agarwal Metals and Alloys Vs. ACIT & Ors., which quashed an assessment order due to the A.O's failure to communicate the reasons for reopening. Similarly, the Hon'ble High Court of Delhi in Pr. CIT Vs. Jagat Talkies Distributors held that the reassessment proceedings would be vitiated if the A.O failed to provide the reasons for reopening.

Conclusion:
The Tribunal restored the matter to the file of the CIT(A) to verify whether the A.O had failed to provide the "reasons to believe" to the assessee. If the CIT(A) finds this claim to be true, the assessment order would be invalidated. The appeal was allowed for statistical purposes, and the Tribunal emphasized the necessity of adhering to legal procedures in reassessment cases.

Order Pronouncement:
The order was pronounced in open court on 30th November 2022.

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