Validity of reopening of assessment where return was filed: reopening held invalid and assessment void ab initio

Reopening of assessment was invalid because the taxpayer had filed and the assessing officer had acknowledged a return of income before the notice; therefore the recorded reasons to believe were factually incorrect and legally flawed, making the subsequent reassessment and assessment order void ab initio and resulting in relief to the taxpayer.

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Issues: Whether the notice issued under section 148 and the consequential reassessment under sections 147/143(3) of the Income-tax Act, 1961 are invalid and liable to be quashed because they proceeded on the incorrect factual premise that the assessee had not filed the return of income.

Analysis: The Tribunal examined the reasons recorded for reopening and the assessment record. The Assessing Officer's primary premise for issuing notice under section 148 was that the assessee had not filed the return for the relevant assessment year. The record, however, shows that the assessee filed the return on 31.07.2011 under section 139(1) which was acknowledged by the Department and was relied upon in the completed assessment under section 143(3). Authorities require that reopening under section 147 be founded on tangible material forming a prima facie opinion or reason to believe that income escaped assessment and that the reasons recorded must correctly reflect the factual basis. Where the reasons proceed on a factually incorrect premise (non-filing of return) the notice lacks the necessary foundation. The Tribunal followed precedent holding that a reasons-to-believe based on erroneous factual assumption renders the notice invalid and the consequent reassessment void ab initio.

Conclusion: The notice under section 148 and the consequent reassessment under sections 147/143(3) are quashed as void ab initio; decision is in favour of the assessee.

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