JHANKIT CHANDULAL PRAJAPATI vs. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(2)

Facts

A search under section 132 of the Income Tax Act, 1961, was conducted on the Kalol Prajapati Group on November 6, 2012. Proceedings under section 153A were initiated against the petitioner, Jhankit Chandulal Prajapati, leading to an assessment order dated March 18, 2015. This order added Rs. 3,00,000 under section 69 for undisclosed investment in Flat No. G-302. The Commissioner (Appeals) deleted this addition on August 11, 2017. The Revenue did not appeal due to low tax effect. Subsequently, a notice dated March 30, 2018, under section 148 sought to reopen the assessment for the same amount, citing escaped assessment. The petitioner's objections were rejected by an order dated August 20, 2018. The petitioner challenged the section 148 notice and the order rejecting objections.

Held

The petition is allowed, and the impugned notice dated March 30, 2018, issued under section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for assessment year 2011-12, is quashed and set aside. The Court held that the Rs. 3,00,000/- in question, which was the subject of the earlier proceedings under section 143(3) read with section 153A and added under section 69, had already been taxed. Therefore, it could not be considered as income that had escaped assessment. The Assessing Officer could not have formed a belief that income had escaped assessment, as it had already been assessed. Furthermore, the issue in respect of which reopening was sought was the subject matter of an appeal before the Commissioner (Appeals), whose order had merged with the Assessing Officer's order. The third proviso to section 147 explicitly prohibits reopening of assessment concerning matters that were subject to appeal, reference, or revision. Thus, the assumption of jurisdiction under section 147 lacked validity and was not permissible in law.

Key Issues

1. Whether the reopening of assessment under section 147 of the Income Tax Act, 1961, is valid when the income sought to be reassessed was already subject to assessment and appeal proceedings under section 143(3) read with section 153A, and subsequently adjudicated by the Commissioner (Appeals)? (Question of law) 2. Whether the Assessing Officer assumed jurisdiction under section 147 on a borrowed belief without independent application of mind, especially concerning the principle of merger with the appellate order? Assessee's contentions: The impugned notice is without jurisdiction due to the principle of merger as per the third proviso to section 147. The reopening is based on a borrowed belief without independent application of mind. Sanction under section 151 was not granted or was mechanically granted, making reopening beyond four years invalid. Reopening on the same issue already gone into during assessment under section 143(3) read with section 153A is not permissible. Reliance was placed on this court's decisions in National Dairy Development Board v. Deputy Commissioner of Income Tax and United Phosphorus Ltd. v. Additional Commissioner of Income Tax. Revenue's contentions: The initial assessment under section 143(3) read with section 153A was based on a search at the petitioner's premises. The impugned notice under section 148 is based on reasons recorded from a search at M/s J.P. Iscon Pvt. Ltd., revealing cash payments by the petitioner for the flat. The Assessing Officer recorded that the petitioner made false statements during assessment and appellate proceedings regarding the cash payment of Rs. 56,45,000/- for the flat, of which Rs. 3,00,000/- was paid in cash in the year under consideration.