ITAT quashes re-assessment proceedings and states that reopening won't be permissible merely to seek investigation of facts

ITAT quashes re-assessment proceedings and states that reopening won't be permissible merely to seek investigation of facts

The Income Tax Appellate Tribunal (ITAT) quashed the re-assessment proceedings and stated that the reopening of proceedings would not be permissible merely to seek investigation of facts

Mr. Sujay Pankajbhai Shah (assessee) challenged the action of the assessing officer (AO) in exercising its jurisdiction under Section 147 of the Income Tax Act, 1961, (IT Act).

It was also contended by the assessee that the reasons recorded by the AO did not meet the pre-requisites for presuming jurisdiction. It was further contended that hence the exercise of jurisdiction was inappropriate therefore the notice issued under Section 148 of the IT Act is bad in law. It was further submitted that the re-assessment order passed by the AO was without having the authority of law.

The reasons recorded under Section 148(2) of the IT Act were highlighted by the assessee. He further contended that notice under Section 148 of the IT Act was issued on 19 March 2013 referring to the reasons recorded on 26 Match 2013. The assessee stated that there was an error apparent on the face as the reasons were recorded subsequently issuing the notice and hence the complete action of the AO is vitiated in law.

The revenue department contended was that they recorded reasons on 19 March 2013 and that it is evident from the proposal sent by the AO to the Joint Commission of Income Tax (Jt. CIT) for his approval on the same date under Section 151 of the IT Act. It was further stated on behalf of the revenue department that the reasons recorded were reflecting date of 26 March 2013 as the reasons recorded might have been reproduced and provided to the assessee and does not convey the date of recording of reasons per se.

The assessee filed an appeal before the ITAT and the matter was listed before the Coram that consists of Madhumita Roy and Pradeep Kumar Kedia. The ITAT noted that powers exercised by the AO under Section 147 of the IT Act were to enable him to carry out a detailed verification of the various aspects that also includes references to the AO herein by the office of Director of Income Tax, Delhi.

The ITAT relied on the judgments in the cases of Pr.CIT v. Manzil Dineshkumar Shah (2018) 406 ITR 326 (Guj), Shri Sujay P. Shah v. ACIT(OSD)]. In this case, it was held that reopening is not permissible merely to seek investigation of facts collected without holding at least prima facie belief towards escapement of income based on the relevant material. The conditions set out for invocation of Section 147 of the IT Act have not been met in the instant case.

The ITAT stated, "Ostensibly, the AO, at best, has made out a case of the probable escapement in contrast to a definite prima facie conclusion of escapement of income. Mere quoting of Section or iteration of expression 'reason to believe' would not satisfy the requirement of law. Thus, the requirement of Section 147 of the IT Act is clearly not fulfilled in the instant case."