PURI RAJU,MAHABUBNAGAR vs. ITO, WARD-1, MAHBUBNAGAR

Succinctly stated, the assessee had filed his return of income for Assessment Year 2013-14 on 26/12/2013, declaring an income of Rs.2,80,500/-. The return of income filed by the assessee was initially processed as such under Section 143(1) of the Act.

As is discernible from the record, the AO, based on the information gathered from AIS that the assessee had during the subject year deposited an amount of Rs.82,59,400/- in his bank account held with UCO Bank, but had not filed his return of income for the year under consideration, initiated proceedings under Section 147 of the Act.

Thereafter, the AO framed the assessment vide his order passed under Section 147 r.w.s 144 r.w.s 144B of the Act, wherein the subject deposits in the bank account of Rs.82,59,400/- (as reported in the AIS) were treated as the unexplained money of the assessee under Section 69A of the Act.

Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success.

The assessee, aggrieved with the CIT(A) order, has carried the matter in appeal before us.

We have heard the Ld. Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record, as well as considered the judicial pronouncements pressed into service by them.

Shri Mohd. Afzal, Advocate, Ld. Authorized Representative (for short, “AR”) for the assessee at the threshold of the hearing of the appeal, submitted that the very assumption of jurisdiction under Section 147 of the Act by the AO is invalid, as the “reasons to believe” recorded for initiating proceedings under Section 147 of the Act proceed on an admitted incorrect factual premise that the assessee had not filed his return of income for Assessment Year 2013-14. The Ld. AR, to support his contention, had drawn our attention to the extract of the “reasons to believe” recorded by the AO for initiating proceedings under section 147 of the Act, Page 75 of APB, the approval granted by the Pr. CIT-4, Hyderabad under Section 151 of the Act, Page 79 of APB, and the original return of income filed on 26.12.2013, Page 35 of APB. The Ld. AR submitted that as the initiation of the proceedings under Section 147 of the Act was based on an incorrect and wrong fact that the assessee had not filed his return of income for the year under consideration, thus the very assumption of jurisdiction by the AO to issue notice under Section 148 of the Act, and framing of the consequential assessment cannot be sustained and is liable to be vacated.

Per contra, Shri Mohan Babu, the Ld. Senior Departmental Representative (for short, “DR”) relied on the orders of the authorities below. It was submitted that as the assessee has participated in the assessment proceedings and not assailed the validity of the assumption of jurisdiction in the course of the assessment proceedings, therefore, he was precluded from raising the same in the course of the present proceedings.

We have given thoughtful consideration to the contentions advanced by the Ld. Authorized Representatives of both parties in the backdrop of the material available on record.

We find on a perusal of the record that the assessee had admittedly filed his return of income on 26.12.2013 vide e-filing Acknowledgment No.854638470261213, declaring an income of Rs.2,80,500/-. The said return of income was processed under Section 143(1) of the Act. In fact, we find that the aforesaid fact has been specifically acknowledged by the AO himself in the assessment order passed under Section 147 r.w.s 144 r.w.s 144B of the Act.

However, we find that despite the aforesaid admitted factual position, the AO recorded reasons for reopening by observing that the assessee had not filed his return of income. Further, the very same incorrect factual premise was reiterated in the proposal seeking approval under Section 151 of the Act, and the same was mechanically approved by the Pr. CIT without verification of the assessment records.

In our considered view, the “reason to believe” must be founded on correct and existing facts, and where the very reopening of the case is based on wrong and incorrect facts, the assumption of jurisdiction cannot be sustained. We find that as stated by the Ld. AR, and rightly so, the present case clearly reflects non- application of mind by the AO in recording the “reasons to believe”, which defect was further perpetuated by the approval granted under Section 151 of the Act without due verification.

We, therefore, based on our aforesaid observations, are of firm conviction that the notice issued under Section 148 of the Act and the consequential proceedings initiated under Section 147 of the Act are invalid in law. Consequently, the assessment framed by the AO under section 147 r.w.s 144 r.w.s 144B of the Act, dated 26.03.2022 is quashed for want of a valid assumption of jurisdiction.

As we have quashed the assessment for want of valid assumption of jurisdiction by the AO, we refrain from adverting to the other grounds based on which the impugned order of assessment has been assailed before us, which, thus, are left open.

In the result, the appeal filed by the assessee is allowed.