2019 (2) TMI 2117 - AT - Income Tax

AO's section 147 reopening invalid due to lack of nexus with escaped income and improper section 148 notice service

Sahil Mahajan Versus Income Tax Officer, Ward-6 (3), Pathankot.

ITAT Amritsar quashed the assessment order on two grounds. First, the reopening under section 147 was invalid as the AO failed to establish any nexus ... Reopening of assessment u/s 147 - reasons to believe OR Reasons to suspect - HELD THAT:- As in the instant case, the initiations of proceedings u/s 147 of the Act are based upon no evidence and/or uncorroborative material. AO further failed to establish the nexus that the investment made by the AO represented assessee's income. In our considered view, the competent authority is required to indicate some link or nexus while recording reasons for belief that the consideration amount of property acquired is chargeable to tax and has escaped the assessment, in this case the proceedings u/s 147 itself are vague, hence in any sense cannot survive and therefore we do not have any hesitation to held that the CIT(A) was absolutely unjustified in upholding the reopening of the assessment u/s 147 of the Act, without appreciating the facts of the case, explanation submitted and evidences places on record judiciously. Hence on this ground also, the assessment proceeding/order is liable to be quashed. Method of serving notice - non serving assessee notice at his proper address - as argued due to non -possibility of service of notice through ordinary means, decided to serve through affixture at the last known address of the assessee - HELD THAT:- As we have called for the record of assessment proceedings, from which it does not reflect that the said notice u/s 148 was ever served upon the assessee or received by the assessee at the address as mentioned in the notice u/s 148 and the order for affixture of notice dated 03.03.2012. Even we realized that the Assessing Officer has sent the notice u/s 148 to the assessee at the address i.e. Behind Power House, Mohalla Saingarh, Pathankot, whereas in the assessment order, the address has been written as C/o Kundan Vila, LIC Lane, Dhanu Road, Pathankot, which further strengthen the case of the assessee that no notice or any enquiry letters has ever served upon the assessee at his proper address. Therefore, non-service of notice u/s 148 of the Act, vitiate the assessment proceedings and therefore on this ground also, the assessment proceeding/order is liable to be quashed. Hence, on the aforesaid analyzations and deliberations and in cumulative effects, we do not have any hesitation to quash the assessment order. Issues Involved:1. Validity of assessment proceedings under Section 147 based on suspicion without material evidence.2. Non-compliance with procedural requirements for issuing enquiry notices.3. Service of notice under Section 148 and its implications.4. Recording of reasons for reopening assessments before the scheduled date for response.Detailed Analysis:1. Validity of Assessment Proceedings under Section 147:The primary issue was whether the proceedings under Section 147 were initiated based on suspicion rather than concrete evidence. The Tribunal found that the Assessing Officer (AO) initiated proceedings based on an assumption that income had escaped assessment without any substantial material to justify this belief. The AO's satisfaction was deemed to be based on mere suspicion, which is insufficient for invoking Section 147. The Tribunal referenced the judgment in CIT vs. Smt. Paramjit Kaur, emphasizing that there must be a nexus between the material and the alleged escapement of income. The Tribunal concluded that the AO failed to establish such a nexus, rendering the proceedings invalid.2. Non-Compliance with Procedural Requirements:The Tribunal examined whether the enquiry notices were issued without the necessary approval from the Commissioner, as required by the second proviso to subsection 6 of Section 133. It was found that the AO did not seek the required approval before initiating the enquiry, which is a mandatory procedural requirement. This oversight was deemed sufficient to invalidate the assessment proceedings.3. Service of Notice under Section 148:The Tribunal scrutinized the service of notice under Section 148. It was noted that the notice was served through affixture on the same day it was sent via speed post, without waiting for the outcome of the postal service. The Tribunal highlighted that proper service of notice is a condition precedent for valid assessment proceedings. The Tribunal found that the notice was not served at the last known address of the assessee, further invalidating the assessment. The Tribunal cited previous cases where similar procedural lapses led to the quashing of assessments.4. Recording of Reasons for Reopening Assessments:The Tribunal addressed the issue of the AO recording reasons for reopening assessments before the scheduled date for the assessee's response. In one instance, the AO recorded reasons on 06.03.2013, despite having adjourned the proceedings to 08.03.2013 for the assessee's reply. This premature action was seen as indicative of a preconceived bias, undermining the fairness of the proceedings. The Tribunal found this procedural irregularity sufficient to quash the assessment order.Conclusion:The Tribunal allowed the appeals, quashing the assessment orders on multiple grounds, including lack of proper material evidence for reopening assessments, procedural non-compliance, improper service of notices, and premature recording of reasons for reassessment. The Tribunal emphasized the importance of adhering to procedural requirements and ensuring that assessments are based on concrete evidence rather than mere suspicion.