2025 (6) TMI 637 - AT - Income Tax

Officer Without Jurisdiction Records Reassessment Reasons Under Section 147, Entire Proceedings Quashed as Invalid

The ITAT Delhi quashed a reassessment order under section 147 due to jurisdictional defects. The reassessment proceedings were initiated by a ... Reopening of assessment u/s 147 by non jurisdictional officer - AR submitted that there was lack of inherent Jurisdiction because reassessment proceedings were initiated by non jurisdictional officer and hence the assessment order may be quashed - HELD THAT:- We find in the case of Saroj Sangwan [2024 (5) TMI 961 - ITAT DELHI] under similar facts, quashed the reassessment as held reasons have been recorded for reopening of the assessment by ITO, Noida who was not authorized to do so, therefore, mere recording of reasons for reopening of the assessment by him is of no consequence and has no value under the law. The AO who has jurisdiction over the case of assessee Le. ITO, Faridabad admittedly did not record any reasons for reopening of the assessment. Therefore, the issue is covered in favour of the assessee. The core legal questions considered in this appeal revolve around the validity and legality of reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961, specifically focusing on jurisdictional issues, procedural compliance, and the applicability of judicial precedents regarding the reopening of assessments. The principal issues include:1. Whether the reassessment proceedings initiated by a non-jurisdictional Assessing Officer (AO) are legally valid.2. Whether the service of notices under Section 148 was proper, considering alleged incorrect addresses.3. The legitimacy of the withdrawal of objections by the assessee under alleged false assurances by the AO.4. The correctness of the addition of income made by the AO and confirmed by the CIT(A).5. The applicability of the principle of 'change of opinion' and the presumption of the assessing officer's opinion under Section 143(3) assessments, especially in light of full and true disclosure by the assessee.Issue 1: Legality of Reassessment Proceedings Initiated by Non-Jurisdictional AOThe legal framework governing reassessment proceedings under Section 147 and the issuance of notices under Section 148 mandates that the AO who records reasons for reopening the assessment and issues the notice must have jurisdiction over the assessee's case. Precedents cited include decisions from coordinate benches of the ITAT and the Hon'ble Gujarat High Court, which have consistently held that reassessment notices issued by an AO who neither recorded the reasons nor had jurisdiction are invalid.The Court referred extensively to a coordinate bench decision wherein reassessment was quashed because the reasons for reopening were recorded by an AO without jurisdiction, and the successor AO did not record fresh reasons. The Court emphasized that the mere transfer of the case does not confer jurisdiction to assume reassessment powers, and the AO who issues the notice must be the same who recorded the reasons.Applying this legal principle to the facts, the Court found that the reassessment was initiated by ITO, Ward 69(1), New Delhi, a non-jurisdictional AO, whereas the case belonged to ITO, Ward 4(1), Gurgaon. Since the non-jurisdictional AO recorded the reasons and issued the notice, the reassessment proceedings were held to be illegal and liable to be quashed.The Court also noted that the Department failed to produce reasons recorded by the jurisdictional AO, further affirming the invalidity of the proceedings.Issue 2: Validity of Service of Notices under Section 148The assessee challenged the reassessment on the ground that notices were issued at incorrect addresses, thereby vitiating the proceedings. The Court, while acknowledging the contention, primarily focused on the jurisdictional issue, which was dispositive. The procedural irregularity regarding service was subsumed under the broader illegality of the reassessment.Issue 3: Withdrawal of Objections under Alleged False AssuranceThe assessee contended that a letter dated 10.11.2017 withdrawing objections to the reassessment proceedings was obtained under false assurances by the AO, which were not fulfilled. The Court did not find sufficient evidence or legal basis to accept this contention, especially as the reassessment itself was quashed on jurisdictional grounds. Thus, this issue became moot.Issue 4: Confirmation of Addition of Rs. 56,58,858/-The addition made by the AO and confirmed by the CIT(A) was challenged on the basis of explanation and evidence filed by the assessee. However, the Court did not delve into the merits of the addition because the reassessment proceedings themselves were invalidated. Consequently, the addition was deleted as a corollary to the quashing of the reassessment.Issue 5: Applicability of 'Change of Opinion' Doctrine and Presumption of Assessing Officer's Opinion Under Section 143(3)The Court extensively analyzed the principle that once an assessment is completed under Section 143(3) with full and true disclosure by the assessee, reopening under Section 147 is permissible only if the AO discovers tangible material indicating escapement of income or failure by the assessee to disclose fully and truly. The Court relied heavily on the Full Bench judgment of the jurisdictional High Court and Supreme Court rulings, which establish that:The presumption under Section 114(e) of the Evidence Act applies to assessments completed under Section 143(3), meaning the AO is presumed to have formed an opinion on the facts disclosed.The reopening of assessment merely due to a change of opinion is impermissible.The mere absence of detailed discussion or queries in the assessment order does not imply the AO did not apply his mind if the assessee furnished full and true particulars.The reopening must be supported by new tangible material not considered at the time of original assessment.The Court cited the judgment of the jurisdictional High Court which clarified that the AO cannot take advantage of a perfunctory assessment order to reopen the case without valid reasons. The Court also referenced the Supreme Court's decision in A.L.A Firm v. CIT, which upheld the principle that information triggering reassessment may come from judicial decisions or materials not considered earlier, but only if such information was genuinely new and not a mere change of opinion.Applying these principles, the Court found no valid grounds to sustain the reassessment, especially as the original return was filed with full and true particulars, and the reassessment was initiated by a non-jurisdictional AO without any new tangible material.Conclusions and Final DeterminationsThe Court concluded that the reassessment proceedings initiated under Section 148 were illegal and without jurisdiction, warranting quashing of the entire reassessment and deletion of the additions made. The Court held that procedural irregularities such as improper service of notice and alleged false assurances did not need separate adjudication given the jurisdictional infirmity. The principle that reopening assessments under Section 147 cannot be done merely on a change of opinion, especially when the original assessment under Section 143(3) was based on full and true disclosure, was reaffirmed.The Court expressly stated:'The assumption of jurisdiction u/s 147/148 of the Act is illegal and bad in law and, as such, liable to be quashed. I, accordingly, set aside the orders of the authorities below and quash the reopening of the assessment u/s 147/148 of the Act. Resultantly the entire addition stands deleted.'Further, the Court preserved the core legal principle that:'When there is no failure on the part of the assessee to furnish full and true particulars and there is no tangible material on the basis of which the assessing officer can allege escapement of income, the only consequence would be that the assessing officer was exercising the power of review on the very same materials which he is presumed to have examined. This would amount to abuse of the power to re-assess and has to be checked.'Respectfully following binding precedents, the Court allowed the appeal and set aside the assessment order.