Reopening assessment under section 147 invalid without tangible material showing income escaped assessment

ITAT Raipur held that reopening of assessment under section 147 was invalid as the AO lacked tangible material to form bonafide belief that income escaped assessment. The AO initiated proceedings for fishing inquiries without evidence of unaccounted cash purchases through the alleged party. Additionally, the assessment was struck down for absence of valid notice under section 143(2), which is foundational for valid assessment orders. The tribunal concurred with CIT(Appeals) that jurisdiction under section 147 was assumed without legal basis. Assessee's appeal was allowed.

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Issues Involved:
1. Deletion of addition on account of unaccounted purchases.
2. Quashing of the reopening of the assessment order.
3. Condonation of delay in filing the appeal by the revenue.

Summary:

Condonation of Delay:
The revenue's appeal was time-barred by 53 days. The delay was attributed to the voluminous orders received from NFAC through the online portal and a shortage of staff. The Tribunal found the reasons to be bona fide and condoned the delay of 53 days.

Deletion of Addition on Account of Unaccounted Purchases:
The assessee, engaged in the wholesale trading business of cloth, saree, and textiles, had his case reopened by the A.O. under Sec. 147 based on information that he made unaccounted cash payments for sarees amounting to Rs. 2,32,24,493/-. The A.O. added this amount to the assessee's income. However, the CIT(A) found that the "reasons to believe" did not indicate how the purchases pertained to the assessee. The CIT(A) observed that the assessment order did not provide any documentary evidence or specific statement linking the purchases to the assessee. The CIT(A) quashed the reopening of the assessment, stating that the A.O. had no tangible material to justify the belief that the income had escaped assessment.

Quashing of the Reopening of the Assessment Order:
The CIT(A) held that the A.O. had no tangible material to form a bona fide belief for reopening the assessment. The Tribunal concurred with this view, noting that the A.O. had not placed any material/evidence on record to substantiate the claim of unaccounted cash purchases. The Tribunal found that the reopening was based on non-application of mind and was merely for fishing and roving inquiries, which is not permissible by law.

Validity of Notice Under Sec. 143(2):
The Tribunal also addressed the issue of the notice under Sec. 143(2), which was issued beyond the stipulated period. The Tribunal held that the assessment order passed in the absence of a valid notice under Sec. 143(2) was not sustainable. The Tribunal's view was supported by the judgments of the Hon'ble Supreme Court in ACIT & Anr. Vs. Hotel Blue Moon and CIT v. Laxman Das Khandelwal.

Conclusion:
The Tribunal dismissed the revenue's appeal and allowed the cross-objection filed by the assessee, thereby quashing the assessment order passed under Sec. 147 r.w.s. 143(3) for want of valid assumption of jurisdiction and absence of a valid notice under Sec. 143(2).

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