2026 (1) TMI 353 - AT - Income Tax

Income-tax reassessment reopening u/s147/s.148 based on 'reason to believe' challenged; notice quashed for borrowed satisfaction.

The dominant issue was whether reopening under s.147/s.148 was valid on the statutory 'reason to believe' standard. The Tribunal held the recorded reasons ... Validity of reopening of assessment u/s 147 - reason to believe OR reason to suspect - assessee has claimed exemption u/s 10(38) - assessee has raised the contention that the assessing officer was not having any material information to form 'a reason to believe' that there was an escapement of income - HELD THAT:- The assessee is engaged in trading activity of shares on regular basis. Therefore, the reasons recorded by the assessing officer, is based on borrowed satisfaction. In addition to this, in the reasons recorded, it is mentioned that assessee has claimed exemption u/s 10(38) however, the fact is that assessee has never claimed the exemption u/s 10(38) of the Act. Besides, no primary enquiry was conducted by the assessing officer before issuance of notice u/s 148 of the Act. Hence, the re-assessment proceedings initiated by the assessing officer is bad in law, therefore, reassessment order may be quashed. Re-assessment proceeding cannot be initiated for making enquiry or verification. However, in assessee’s case it is clear from the reasons recorded that case was reopened just to verify the details. We note that Hon'ble jurisdictional High Court in the case of PCIT v/s Manzil Dinesh Kumar Shah [2018 (5) TMI 1176 - GUJARAT HIGH COURT] held that case of an assessee cannot be reopened just to verify the details. In assessee’s case, under the guise of reopening of the assessment, the Assessing Officer wants to have a roving inquiry; as observed hereinabove. Even as per the Assessing Officer in the reasons recorded, has specially mentioned that for the purpose of verification of the claim, it is necessary to reopen the assessment. Under the circumstances, it cannot be said that the Assessing Officer had any tangible material to form an opinion that the income chargeable to tax has escaped the assessment. The impugned action of reopening of the assessment in exercise of power under section 148 of the I.T. Act for the reasons recorded hereinabove cannot be sustained. Assessee appeal allowed. Issues: (i) Whether the reopening of assessment by issuance of notice under section 148 read with section 147 of the Income-tax Act, 1961 was validly made or was vitiated for lack of tangible material and being merely a roving/verification exercise.Analysis: The appeal examines the reasons recorded by the Assessing Officer for reopening earlier assessments. The legal framework applicable is the old provisions of sections 147/148 of the Income-tax Act, 1961 which require that the Assessing Officer must have tangible material to form a 'reason to believe' that income has escaped assessment and cannot initiate reassessment merely to verify or conduct a roving inquiry. The Tribunal evaluated the recorded reasons and noted absence of any tangible material or primary enquiry; the reasons indicated that information needed 'deep verification' and reflected borrowed satisfaction. Reliance was placed on authoritative precedent that reopening cannot be used for verification alone and that mere recital of mandatory words without independent material is inadequate. On these grounds the Tribunal held that the assumption of jurisdiction under section 148/147 was not in accordance with law.Conclusion: The reopening of assessment under sections 147/148 was invalid and the reassessment proceedings are quashed; the appeals are allowed in favour of the assessee.