SMT. MEERA DEVI AGRAWAL,,RAIGARH(C.G) vs. THE ITO- 1,, RAIGARH(C.G)

When the matter was called for hearing, the learned counsel for the assessee, at the outset, pointed out that the Assessing Officer initiated re-assessment proceedings under s.147 of the Act and completed the assessment determining the assessed income at Rs.14,49,620/- as against the returned income of Rs.70,340/-.

In the backdrop of the chequred history pointed out, the learned counsel submitted that the Tribunal omitted to decide the legal ground on validity of assumption of jurisdiction under s.147 r.w.s. 148 of the Act.

Aggrieved, the assessee filed appeal under s.260A of the Act before the Jurisdictional High court. The Hon’ble High Court of Chhattisgarh, Bilaspur in its judgment dated 03.04.2019 allowed the appeal of the assessee. The order of the Tribunal dated 15.01.2018 was set aside and remanded back to the Tribunal for deciding the matter both on factual and legal score including the issue pertaining to the validity of notice under s.148 of the Act.

In the background quoted above, the learned counsel for the assessee adverted to para no.2 of the assessment order wherein the reasons recorded for issue of notice under s.148 of the Act was extracted. It was pointed out that on a perusal of the reasons recorded, it can be seen that the ingredients of Section 147 of the Act are not fulfilled in the instant case in as much as the jurisdiction for reopening the concluded assessment was carried out only to ‘verify’ the genuineness of the facts which were the basis for assuming the jurisdiction. The learned counsel thus submitted that the assessment was reopened merely to verify the fact and as a corollary, the belief of the AO on the reasons is conspicuously absent. In the absence of the belief of the AO on the reasons for alleged escapement of income, the issuance of notice under s.147 of the Act is without legal foundation and thus a nullity. The learned (Smt. Meera Devi Agrawal vs. ITO) A.Y. 2002-03 - 4 - counsel thus urged for quashing the impugned notice issued under s.148 of the Act dated 03.02.2006 for A.Y. 2002-03 having regard to vital legal defect in assuming the jurisdiction.

The learned DR for the Revenue, on the other hand, submitted that the legal issue on assumption of jurisdiction under s.147 of the Act has been examined by the CIT(A) and answered in negative by him. He submitted that the Revenue seeks to rely on observations and the findings of the CIT(A) in this regard.

We have carefully considered the rival submissions. We have also perused the reasons recorded for issuance of notice under section 148 r.w.s. 147 of the Act under challenge. It will be apt to reproduce reasons recorded hereunder for easy reference:-

On a bare reading of the body of the reasons recorded, it can be seen that the initiation of proceedings under s. 147 of the Act by the AO is based on certain information stated to be received from Sales Tax Department. Based on such information, the AO has proposed to reopen the case inter alia with expression “in order to verify the genuineness of the facts, the notice under s.148 of the Income Tax Act, 1961 is issued as it appears that there are certain income which has escaped from assessment.” Furthermore, the words ‘it appears’ show only suspicion in contrast to belief. (Smt. Meera Devi Agrawal vs. ITO) A.Y. 2002-03 - 5 - Contextually, no reference to the nature and description of information received from the Sales Tax Department is discernible. It is ostensible from the reasons recorded that AO did not form any ‘belief’ contemplated under s.147 of the Act towards escapement of income. A plain reading of reasons provided would overtly show that the AO merely wanted to make enquiry to find out the correctness of so-called information claimed to have been received from the Sales Tax Department and quantify the amount of escaped income at a later stage. The bonafide ‘belief’ towards escapement of income which is a mandatory pre-requisite is clearly absent in the present case. In the absence of such belief, the entire action of the AO is a complete non-starter and thus requires to be struck down. There are long line of judicial precedents delivered both by the Jurisdictional High Court as well as other High Courts for the proposition that re-assessment notice for mere verification or for conducting a fishing enquiry is not permissible in law notwithstanding that the return of income was not subjected the scrutiny under s.143(3) of the Act. The action of the AO for invoking jurisdiction is thus inconsistent with the mandate of law and therefore requires to be quashed.

It is well settled by plethora of judicial precedents, including Pr.CIT vs. Manzil Dineshkumar Shah (2018) 406 ITR 326 (Guj), the SLP against which has been dismissed in (2019) 101 taxmann.com 259 (SC) 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 relevant material. The conditions set out for invocation of Section 147 of the Act have not been met in the instant case. Hence, the notice issued under section 148 of the Act is not backed by authority of law and consequently bad in law. (Smt. Meera Devi Agrawal vs. ITO) A.Y. 2002-03 - 6 - 10. The assessment under section 147 of the Act as a sequel to the illegal notice under section 148 of the Act is therefore a nullity and requires to be quashed.

In the result, the assessee succeeds on legal ground towards validity of jurisdiction under section 147 of the Act. Neither has the learned counsel for the assessee addressed us on the aspects of merits at the time of hearing nor do we consider it necessary to dwell upon the same.

In the result, appeal of the assessee is allowed.