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Facts
The assessee's appeal was filed belatedly by 83 days, and the delay was condoned. A key issue was whether the Assessing Officer (AO) had tangible material to reopen the case for assessment year 2012-13, especially since no regular assessment was completed for that year.
Held
The Tribunal held that the reopening of the assessment was invalid and bad in law. The AO had not possessed any new tangible material and the previous AO had not found it necessary to scrutinize the case. The reopening was considered a review of earlier proceedings and an abuse of power.
Key Issues
Whether the reopening of assessment under Section 147/148 of the Income Tax Act was legally and procedurally valid, given the lack of fresh tangible material and prior non-scrutiny of the assessment.
Sections Cited
147, 148, 151, 143(2), 143(3), 133A, 131, 139(1)
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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI JAGADISH
आदेश / O R D E R
PER MANU KUMAR GIRI, JM:
The captioned appeal filed by the assessee is directed against order of the Ld. Commissioner of Income Tax (Appeals), Delhi, [‘CIT(A)’ in short] dated 28.02.2025 for Assessment Year 2012-13.
At the outset, the Ld.AR of the assessee brought to our notice that the appeal has been filed belatedly by ‘83’ days and for condoning the delay, the assessee has filed an affidavit explaining the cause for the delay. Having gone through the contents of the same, we find that cause for delay was reasonable, so we excuse the same and proceed to hear the assessee’s appeal on merits.
The assessee has raised a legal issue that AO had no fresh tangible material for reopening of the case.
The ld.CIT(A)’s has decided the legal issue against the assessee and held as under:
1. 4.4. The appellant has doubted as to whether proper sanction had been accorded u/s.151 considering the vague reasons and non- availability of details. By filing RTI application the appellant had requested to supply the approval u/s 151 by the specified authority to reason recorded by the AO. The department has denied supplying the approval of the reasons recorded by the AO, on the basis of confidentiality. 4.5. The appellant has contended that the AO had no fresh tangible material for reopening of the case. Though there was time to issue notice u/s 143(2) for the assessment year 2012-13 the Assessing Officer of the trust and the trustees chose not to issue the notice. The scrutiny assessment proceedings were conducted for assessment year 2013-14 based on the impounded materials. The original assessment, in the case of the appellant for assessment year 2013-14 was completed on 28.03.2016 u/s. 143(3). The appellant has referred para no. 12 of page 7 of assessment order for A.Y. 2012-13 and alleged that the AO has mentioned that the assessee has not filed the return of income for the A.Y. 2012-13 at all. The appellant has stated that In the instant case, though the time limit for issuing notice u/s 143(2) was available till September 2013 (survey conducted on 23.01.2013) and impounded materials was also available with the assessing officer, the assessing officer had chosen to not issue regular scrutiny notice for the assessment year 2012-13. The appellant has contended that the AO did not take the case of the appellant for A.Y. 2012-13 for normal scrutiny assessment u/s 143(3) of the Act and after 6 years he had reopened the case u/s 147 which is not justified. After survey proceedings, the AO had all impounded material in his possession which must have examined and not found any discrepancy. This is the reason that the AO had not taken the appellant's case for A.Y. 2012-13 under scrutiny. After 6 years, reopening of the case tantamount to change of opinion. The appellant has referred the judgment of Hon'ble Delhi High Court in the case of CIT v Atul Kumar Swami [2014] 88 CCH 0169 (Del). 4.4. I have perused and considered carefully the written submission of the appellant. I have also perused and considered the documents uploaded by the appellant on the ITBA portal during the appellate proceedings. In ground no. 1, 2, 4, and 9, the appellant has challenged the reopening of the case by the AO u/s 147 of the Income Tax Act, 1961. The appellant has contended that the AO had no tangible information/material facts for reopening of the case. However, a perusal of assessment order reveals that the case of the appellant for A.Y. 2012-13 was not taken for regular assessment. After examining of the impounded material and the statement recorded during the survey proceedings the AO noticed that substantial amount of undisclosed investment made by the trustees in the trust for purchasing of land and construction of building pertains to the F.Y. 2011-12 relevant to A.Υ. 2012-13. Since no regular assessment was done in the case of the appellant for A.Y. 2012-13, the AO has formed his belief that the appellant had income escaped assessment for the A.Y. 2012-13. A perusal of impugned assessment order in view of the written submission of the appellant shows that the managing trustee has himself contradicted his own statement recorded during the survey proceedings. The documents impounded during the survey proceeding, such as completion certificate issued by the Government Approved Valuer vide which the college building was completed during F.Y. 2012-13 and total investment in the land and building was Rs.17,02,16,000/-; statement of the cash received at Rs. 1,28,98,946/- during the F.Y. 2011-12 by the contractor builder etc. suggested that the trustees, including the appellant had invested substantial amount in the trust during the F.Y. 2011-12 but did not declared it in their Income Tax Return. These issues were never examined by the AO. Therefore, I am of the considered opinion that the AO had tangible material fact for reopening of the case under reference. 4.5. The AO had issued notice u/s 148 after obtaining approval u/s 151 of the Income Tax Act from the specified authority. The AO duly recorded his satisfaction for reopening of the case, thereafter he put up the same with relevant record before the specified authority u/s 151 of the Act, who after applying his mind accorded the proposal of the AO for reopening of the case. The appellant has brought nothing on record to prove that the AO or the approving authority have mechanically worked on the information received from the investigation wing without applying their mind. Thus, the contentions of the appellant that the AO worked mechanically on the information available with him for reopening of the case do not carry much force. Reliance is placed on the judicial pronouncement in the case of AGR Investments Ltd. vs. Addl. CIT (Del) 333 ITR 146 wherein Hon'ble Delhi High Court held that where Assessing Officer had specific information as regards transactions entered by assessee company with a number of concerns which had made accommodation entries and they were not genuine transactions, it could be said that there was material on basis of which notice under section 148 could be issued. It is further pertinent to mention here that in the case of CIT vs. Nova Promoters & Finlease (P) Ltd (ITA No. 342 of 2011) dated 15.02.2012, the Hon'ble Delhi High Court held that as long as there is a 'live link' between the material which was placed before the Assessing Officer at the time when reasons for reopening were recorded, proceedings u/s 147 would be valid. The Court also held- "We are aware of the legal position that at the stage of issuing the notice u/s 148 the merits of the matter is not relevant and the Assessing Officer at that stage is required to form only a prima facie belief or opinion that income chargeable to tax has escaped assessment." 4.6. Furthermore, in the case of Jyoti Goyal vs ITO (ITA No. 1259/Del/2010), the Hon'ble ITAT Delhi held that: "As regards the other contentions of the assessee that the reopening was done in a mechanical manner without application of mind, we find there is nothing on record to support such a contention. There is a live link between the information which was available with the Assessing Officer and his formation of belief that income has escaped assessment. Sufficiency of such information cannot be gone into while deciding the issue of validity or reopening. The Assessing Officer can also not make enquiries as no proceedings were pending before him for the relevant assessment year. In the above view of the matter, we are in agreement with the finding of the Ld. CIT (A) that the reopening of assessment u/s 147 of the Act was valid." From the above discussion the appellant has failed to demonstrate any irregularity or procedural laps on the part of the AO. Therefore, a contention and doubt of the appellant that the AO had not obtained proper approval u/s 151 of the Act, do not carry much strength.
4.7. Regarding, the contention of the appellant that the reason for reopening of the case tantamount to change of opinion, it is a matter of fact that no regular assessment was completed in the case of the appellant for A.Y. 2012-13. As discussed above that the AO had tangible information pertaining to the A.Y. 2012-13 which were never examined by the AO as the case of the appellant was not under scrutiny. The AO had issued notice u/s 148 within prescribed time limit of the 6 years from the end of the relevant assessment year. 4.8. Reliance is placed on of the Supreme Court in the case of CIT V. Kelvinator India Limited, reported in 320 ITR 561(SC). The judgment of the Hon'ble supreme court in this case defines that what constitute "change of opinion" and "reason to believe". Simple test is that whether the issues constituting the reasons for reopening the case were discussed by the AO or submission on these issues were given by the assessee during the original assessment or not. If answer is negative and the reason for not discussing the issues involved is bona fide and inadvertent oversight on the part of the AO and if later on the AO realizes this oversight himself or it is pointed out by the audit party and consequently the case is reopened as a corrective measure, that does not constitute "change of opinion" rather the same constitutes "reason to believe". In the case of CIT v. Rinku Chakraborthy 20 taxmann.com 609 (Karnataka) it is held that when an income liable to tax has escaped assessment in the original assessment proceedings due to oversight and inadvertence or mistake committed by the ITO, he has jurisdiction to re-open the assessment. Thus, I am of considered opinion that since, the all issues discussed in the reassessment and recorded as reasons for reopening of case were neither asked by the AO nor the respective details were filed by the appellant, challenging the legality of reopening of the case does not have any force. Therefore, the ground of appeal on this issue is dismissed and not allowed. 4.9. Regarding non rebuttal of objection raised by the appellant against reopening of the case, a perusal of assessment order shows that the appellant shows that the appellant did not make proper compliance during the assessment proceedings. Nowhere the AO has mentioned about the objection filed by the appellant against the reopening of the case. It seems that the appellant has just raised this ground of appeal in routeen manner. Similarly, the contention of the appellant that the AO did not consider the reply file by the appellant does not carry any strength as the AO has not mentioned in the assessment order that the appellant had ever filed any reply during the assessment proceedings. 4.10. With respect to the contention of the appellant that the impugned assessment order was passed without generating a DIN number as mandated by CBDT circular dated 19/2019. While the assessment order was passed u/s. 147 and dated 17.12.2019, the intimation of DIN was dated 17.12.2019; I have considered carefully the submission of the appellant given by him in support of the above ground of the appeal. A perusal of impugned assessment order shows that it did not carry any DIN. Different High Courts and Tribunals have given number of judgement in favour and in against of the revenue. In the case of Commissioner of Income-tax v. Commissioner of Income-tax, [2024] 158 taxmann.com 247 (SC), Hon'ble Supreme Court has granted an interim stay to the revenue against order of High Court that where Assessing Officer passed final assessment order without DIN, since there were по exceptional circumstances as mentioned in Circular No. 19/2019, dated 14-8- 2019, communication of impugned order manually without DIN, could not be sustained. In view of the stay granted by the Hon'ble Apex Court, the above contention of the appellant is not acceptable. 4.11 In the instant case, the objections raised by the appellant were duly rebutted by the AO. The reasons recorded for reopening of the case are specific and backed by the material facts, thus, it cannot be termed as 'change of opinion'. In view of the facts of the case and in the light of judicial pronouncement as discussed above, I am of the considered opinion that reopening the case u/s 148 of the Income Tax Act is legally and procedurally valid and justified. Hence, the ground no. 1, 2, 4 and 9 of the appeal are dismissed and not allowed.
Now the assessee is in appeal before this Tribunal.
The ld.AR for the assessee submitted that the issue of the legal validity of the reopening u/s 147/148 of the Act is squarely covered by the order of the co-ordinate bench in a bunch of cases titled Shri Nochipalayam Kaliappan Kandasamy Vs The ACIT [ITA No.1341/CHNY/2024 for AY 2012-13 and Other cases.
The ld.DR for the revenue relied upon the orders of the authorities below. However, did not dispute the factum of the order of Tribunal referred supra.
We have heard the rival submissions and perused the record and order of the co-ordinate bench in a bunch of cases titled Shri Nochipalayam Kaliappan Kandasamy Vs The ACIT [ITA No.1341/CHNY/2024 for AY 2012-13 and Other cases which held as under:
10. We have heard the rival submissions of both the parties. The facts as noted are that, survey action u/s 133A of the Act was conducted on 23.01.2013 in the course of which several material including loose documents, trial balance, completion certificate, estimated cost of construction etc. were seized by the AO. Also, statements of several persons were recorded by the AO at the time of survey. Thereafter, pursuant to post survey enquiries, the AO is noted to have recorded the last of the statement of the trustees in the month of August 2013. It is accordingly noted that the AO was indeed aware about the contents of the seized material, as he had examined the same in the post survey enquiries and thereafter examined the trustees on oath u/s 131 of the Act.
For the relevant AY 2012-13, the assessee is noted to have filed his return of income on 16.10.2013. Having regard to the time limit set out in Section 143 of the Act, it is observed that, the AO was legally empowered to take up the income-tax assessment of AY 2012-13 for scrutiny until six months from the end of the relevant assessment year i.e. 30.09.2013, if the return is filed within due-date u/s 139(1) or six months from the end of the financial year in which the return is furnished. Accordingly, in light of the facts, as taken note above, we find that, the AO being already in possession of seized material found in course of survey, could have indeed taken up the case for AY 2012-13 for regular scrutiny u/s 143(2) of the Act, even if the assessee [Arvind] had filed return on 16.10.2013, if in his view, it was necessary to do so, since he had time till 30.09.2014 to issue notice u/s 143(2). The AO is however noted to have refrained from doing so. We therefore find force in the Ld. AR’s submission that, the AO, who had conducted the survey, after examining the impounded material, was not of the view that the income of the assessee for AY 2012-13 was required to be scrutinized. Later on however, the AO’s successor is noted to have changed his opinion and issued notice u/s 148 of the Act on 26.03.2019 beyond four years from the end of the relevant assessment year, on the basis of the same impounded material, which was already in his possession, when the assessment for AY 2012-13 was not taken up for scrutiny u/s 143(2) of the Act, and basis the same stale material, the AO is noted to have formed his belief that income of the assessee chargeable to tax had escaped assessment. According to us, such action of the AO cannot be countenanced. The relevant recorded reasons,
by the AO before reopening the assessment for AY 2012-13 as taken note of by us, is as follows:-
“The assessee is one of the trustee in "The Karur Kongu Charitable Trust", located at No.464, Vaiyapuri Nagar, 2nd Cross, Sengunthapuram, Karur. The trust was established on 04.02.2011. The trustees (32 in Nos) bought 17.99 acres of land at Pungambadi village, near Karur on 09.03.2011. The guide line value of the land was Rs. 14,40,000/- and the market value was Rs.2,60,50,000/-. Out of this, the trust bought 5.02 acres of land at a cost of Rs.4.49 lakhs for constructing a Polytechnic College. During the Financial Year 2011-12 relevant to the assessment year 2012-13, the trust started constructing a Polytechnic College on the land. The construction work was continued till the financial year 2012- 13.
Meanwhile a survey u/s 133A was conducted at the premises of the above trust on 23.02.2013. During the survey proceedings, sworn statements were recorded from R. Palanisamy, the Managing trustee, Shri B. Sathyamoorthy, partner of Erode based builder firm (M/s S.Selvaraj& Co) and Shri S. Sethurajan site Engineer of the firm.
Shri R. Palanisamy, the managing trustee of the trust had admitted in his statement that a сonstruction contract was executed between the trust and with a builder firm called M/s S. Selvaraj & Co of Erode on 05.09.2011. The total value of the contract was Rs. 12 crores. Also, according to him, the trust had paid Rs.8 lakhs as on 23.01.2013 Further, he had admitted, each trustee had contributed Rs. 40 lakhs towards the construction cost.
In his statement, the partner of the builder firm Shei R.R.Sathyamoorthy also acknowledged the contract agreement executed on 05.09.2011 towards the construction of the Polytechnic College. Further, he had admitted that the firm had received Rs.3,80,00,000/- and the total value of the contract was Rs.7 crores (except cement and steel). Further, the statement given by the ate engineer Shri S. Sethurajan on the loose sheets impounded also strengthened the building construction commenced during the Financial Year 2011-12
Consequent to the survey, the assessments of the 32 trustees for the Asst. Year 2013-14 were completed on 28.03.2016 During the scrutiny proceedings, the trustee Shri S.Aravind admitted Rs.8 lakhs towards the purchase of land (17.99 acres) from his unaccounted income However, he failed to disclose the investments made on the construction of the College building Further, the trustee had failed to admit the investments even in the return of income filed for the assessment year 2012-13. In this juncture, it is pertinent to note that the trust came into existence only in the year 2011 and the trust had not generated any income during the year of construction. The only source for the construction was from the trustees as there was no external borrowings by the trust
Therefore, the above trustee had failed to disclose truly and fully on the investments made during the Financial Year 2011- 12 on the construction of the Polytechnic College. Hence, I have reason to believe that the income chargeable to tax has escaped assessment and I request the Pr.CIT Trichy-1, Trichy to accord approval to initiate proceedings u/s 147 for the assessment year 2012-13.”
Reading of the above reasons shows that, the AO has relied on the same statements which were recorded at the time of survey and the material impounded then, to infer that the assessee had not fully disclosed the correct value of his investments. In our opinion, when the AO’s predecessor, who conducted the survey, did not choose to issue a notice u/s.143(2) of the Act to initiate proceedings for scrutiny of the return of income of AY 2012-13, on the basis of the seized survey material already in his possession, then the obvious conclusion was that he did not consider it necessary or expedient to do so. This opinion of the AO cannot be arbitrarily changed to re-assess the income on the basis of stale material, which was already on record. Having missed this bus earlier, the Revenue cannot be permitted to avail of the extended time- limit beyond four years, particularly in the absence of any new or tangible material (apart from the existing survey material) being brought on record. In our considered view therefore, the reopening of assessment for AY 2012-13 was invalid and bad in law.
Our above view is found to be squarely supported by decision of the Hon’ble jurisdictional Madras High Court in the case of Tanmac India v DCIT (supra). While answering to the question as to whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the Assessing Officer is justified in reopening the assessment by issuance of notice under section 148 of the Act when no new material was unearthed justifying the re-opening of the assessment, the Hon’ble High Court is noted to have held as follows:
“12. If the assessing officer, after issuing intimation u/s. section 143(1) does not issue a notice u/s. 143(2) of the Act to initiate proceedings for scrutiny of the return of income, the obvious conclusion is that he does not consider it necessary or expedient to do so, the inference being that the Return of Income filed was in order. It is this opinion that cannot be arbitrarily changed by the assessing officer, to re-assess income on the basis of stale material, already on record. If we thus keep in the mind the above fundamental requirement of section 147, it would be apparent that the exercise undertaken by the Revenue in this case is not one of re-assessment, but of review. The reasons make it abundantly clear that the re- assessment is sought to be initiated on the basis of the return of income and the enclosures which were available with the assessing officer since 2.11.1998 and which ought to have prompted him to issue a notice under section 143(2) of the Act to conduct the proceedings under scrutiny. What is sought to be done by the re-assessment ought to have been achieved by scrutiny assessment proceedings. Having missed the bus earlier, the Department cannot be permitted to avail of the extended time limit in the absence of any new or tangible material, when the time for scrutiny assessment has elapsed on 31.3.2001, prior to issue of notice u/s.
The notice under section 148 dated 9.12.2002 is thus an arbitrary exercise of power and a review of proceedings impermissible in law.
13. The Division Bench of the Delhi High Court in the case of CIT v. Orient Craft Ltd. [2013] 354 ITR 536/215 Taxman 28/29 taxmann.com 392 deals specifically with this aspect of the matter. The substantial question of law that was dealt with by the High Court is as follows;
'Was the Tribunal right in law in holding that in the absence of any tangible material available with the Assessing Officer to form the requisite belief regarding escapement of income, the reopening of the assessment made under section 143(1) is bad in law?'
14. The Division Bench notes that the Supreme Court in the case of Rajesh Jhaveri stock Brokers P. Ltd. (supra) only deals with the formation of an opinion at the time of issuance of prima facie intimation and does not indicate anywhere that a re-assessment can be initiated in the absence of a reason to believe.
To conclude, the Division Bench holds thus:
'This judgment, contrary to what the Revenue would have us believe, does not give a carte blanche to the Assessing Officer to disturb the finality of the intimation under section 143(1) at his whims and caprice; he must have reason to believe within the meaning of the section.’” [emphasis given by us]
The Hon’ble Madras High Court in particular on the issue of non- action on the part of the Assessing Officer in issuing 143(2) of the Act on the basis of material which was already on this record, is noted to have observed as under: - “16. The facts as well as the law remain identical in all three cases. Thus, merely by virtue of the non-action on the part of the assessing officer in the case of the present assessee, i.e. by his failure to issue a notice under section 143 (2) of the Act, the Department gets the advantage of another four years from 31.3.2002 to initiate proceedings for re-assessment. This obviously can neither be the proper interpretation of section 147 nor the intention of Legislature. …………………………….. …………………………………….
It is incorrect to state that the Assessing Officer had no opportunity as the statute grants him full opportunity to scrutinize the assessment if he felt it was necessary and expedient for him to do so. Having chosen not to, he cannot resort to the provisions of S.147 in the absence of any new or fresh material indicating escapement of income.
A decision of the Delhi High Court in the case of Orient Craft Ltd. (supra) had occasion to consider a similar question and the Division Bench, at Page 546, holds as follows;
'Having regard to the judicial interpretation placed upon the expression reason to believe", and the continued use of that expression right from 1948 till date, we have to understand the meaning of the expression in exactly the same manner in which it has been understood by the courts. The assumption of the Revenue that somehow the words "reason to believe" have to be understood in a liberal manner where the finality of an intimation under section 143(1) is sought to be disturbed is erroneous and misconceived. As pointed out earlier, there is no warrant for such an assumption because of the language employed in section 147; it makes no distinction between an order passed under section 143(3) and the intimation issued under section 143(1). Therefore, it is not permissible to adopt different standards while interpreting the words "reason to believe" vis-à-vis section 143(1) and section 143(3). We are unable to appreciate what permits the Revenue to assume that somehow the same rigorous standards which are applicable in the interpretation of the expression when it is applied to the reopening of an assessment earlier made under section 143(3) cannot apply where only an intimation was issued earlier under section 143(1). It would in effect place an assessee in whose case the return was processed under section 143(1) in a more vulnerable position than an assessee in whose case there was a full-fledged scrutiny or is accepted without demur is not a matter which is within the control of the assessee; he has no choice in the matter. The other consequence, which is somewhat graver, would be that the entire rigorous procedure involved in reopening an assessment and the burden of proving valid reasons to believe could be circumvented by first accepting the return under section 143(1) and, thereafter, issue notices to reopen the assessment. An interpretation which makes a distinction between the meaning and content of the expression "reason to believe" in cases where assessments were framed earlier under section 143(3) and cases where mere intimations were issued earlier under section 143(1) may well lead to such an unintended mischief. It would be discriminatory too. An interpretation that leads to absurd results or mischief is to be eschewed." . . . . . . . . . . . The reasons recorded by the Assessing Officer reached the belief that there was escapement of income "on going through the return of income" filed by the assessee after he accepted the return under section 143(1) without scrutiny, and nothing more. This is nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer, both strongly deprecated by the Supreme Court in CIT v. Kelvinator (supra).'”[Emphasis supplied]
Following the ratio laid down by the Hon’ble jurisdictional High Court (supra), we hold that the reopening of assessment for AY 2012-13 to be bad in law and therefore the impugned order passed u/s 147/143(3)
(AY 2012-13) Ramasamy Kandasamy of the Act is held to be ab initio void and is thus quashed. The assessee thus succeeds in his appeal in for AY 2012-13.
The facts of the present case are identical to the facts of the case in Shri Nochipalayam Kaliappan Kandasamy Vs The ACIT. Hence, respectfully following the order of the co-ordinate bench in a bunch of cases titled Shri Nochipalayam Kaliappan Kandasamy Vs The ACIT [ITA No.1341/CHNY/2024 for AY 2012-13 and Other cases referred supra, we hold that the reopening of the assessment for AY 2012-13 is ab initio void and thus is set aside.
In the result, the appeal of the assessee is allowed.
Order pronounced on the 19th day of November, 2025, in Chennai.