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Facts
The assessee's appeals relate to assessment year 2010-11, concerning an addition made to income and a penalty levied. The Assessing Officer (AO) reopened the assessment under Section 147 of the Income Tax Act based on information suggesting a sale of immovable property. However, an independent inquiry from the Sub-Registrar office revealed no record of such a transaction by the assessee.
Held
The Tribunal held that the AO's assumption of jurisdiction to reopen the assessment under Section 147 was invalid because the belief of income escapement was based on incorrect facts, as confirmed by the AO's own inquiry. Consequently, the assessment order was quashed.
Key Issues
Whether the reopening of assessment under Section 147 was valid when the AO's basis for belief of income escapement was found to be incorrect. Whether the subsequent penalty under Section 271(1)(c) survives if the assessment order is quashed.
Sections Cited
143(3), 144, 147, 148, 271(1)(c), 133(6), 142(1), 274, 234A, 234B, 234C, 234D, 139(4A)
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI T.R. SENTHIL KUMAR
These two appeals relate to the same assessee ,filed by it against separate orders passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre & 378/Ahd/2025 [Jindal Development Foundation Trust vs. ACIT] A.Y. 2010-11 - 2 – (hereinafter referred to as “CIT(A)”) of even date 23-12-2024, one in quantum proceedings confirming the addition made to the income of the assessee in assessment framed u/s 143(3) r.w.s 1437 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and the other confirming penalty levied under Section 271(1)(c) of the Act , both pertaining to Assessment Year (A.Y) 2010-11.
The grounds raised by the assesse are as under:
“1 The order passed u/s 143(3) rws 144 is bad in law as well as on facts: 2 The learned AO erred in law as well as on facts in re- opening the assessment under section 147 without there being any income chargeable to tax which had escaped the assessment. The Hon'ble CIT(A) has erred in confirming the same. 3 The learned AO erred in law as well as on facts by re- opening the assessment without having a reason to believe that income has escaped the assessment. The Hon'ble CIT(A) has erred in confirming the same. 4 The learned AO erred in law as well as on facts in passing the order u/s. 144 of the Act without taking into account all relevant material available on record. The Hon'ble CIT(A) has erred in confirming the same.
& 378/Ahd/2025 [Jindal Development Foundation Trust vs. ACIT] A.Y. 2010-11 - 3 –
5 The learned AO erred in making addition of Rs. 24,23,000 with respect to sales of land without any material on record which proves that appellant has sold the land. The Hon'ble CIT(A) has erred in confirming the same.”
Ld. Counsel for the assessee first took up Ground Nos. 1, 2 & 3 for making his argument challenging the validity of the assessment framed u/s.147 of the Act in the present case.
He pointed out from the assessment order that the AO assumed jurisdiction to reopen the case of the assessee and frame assessment u/s.147 r.w.s. 148 of the Act, on the belief that income earned by the assessee on a transaction of sale of an immoveable property had escaped assessment since the said transaction had not being disclosed by the assessee in the return of income filed. Ld. Counsel for the assessee pointed out that in the assessment order itself the AO noted that he had conducted independent enquiry from the Sub-Registrar office who had certified that there was no record of the assessee trust in their Master Register. Ld. Counsel for the assessee contended, therefore, that having verified from an independent third party, that too a state authority, that no transaction of sale of any immovable property was conducted by the assessee during the impugned year, the basis with the AO for assuming jurisdiction to frame assessment u/s.147 of the Act failed, that therefore, the assessment framed by the AO was invalid and ought to be quashed. He drew our attention to the contents of the assessment order revealing the above facts as under:
& 378/Ahd/2025 [Jindal Development Foundation Trust vs. ACIT] A.Y. 2010-11 - 4 – & 378/Ahd/2025 [Jindal Development Foundation Trust vs. ACIT] A.Y. 2010-11 - 5 –
Ld. DR, however, relied on the findings of the Ld. CIT(A) at page 7 of his order dismissing the above contentions of the assessee, noting that the AO had information of ITD that the & 378/Ahd/2025 [Jindal Development Foundation Trust vs. ACIT] A.Y. 2010-11 - 6 – assessee had transacted sale of property during the year and the jurisdiction assumed u/s.147 of the Act was as per law.
“In the light of above facts of case, on perusal of appellant grounds of appeal as advanced against assessment order, it is observed that appellant is contending the order of AO as bad in law as it involves erroneous re-opening of assessment as there being no escapement of income and accordingly requested to treat the order of AO as not maintainable, Further in these grounds of appeal, appellant contends the passing of order u/s. 144 of IT Act is not maintainable as AO fails to take all material available on record and thereby contended the order as bad in law. Further also contended the addition made for Rs 24,23,000/- on account of sale of land as not maintainable as it involves having no material with the AO on record to arrive at this addition. In this analogy, appellant precisely contended that the re- assessment proceedings as not Valid as it involves no material adducing escapement of income with the AO and also no notice is served on the appellant and thereby contended the order as bad in law. However, after careful consideration of appellant submissions and keeping in view the overall facts on record as brought out by AO in the assessment order and related penalty order, it is clearly noticeable that, appellant is indeed having alleged for the transaction in sale of property thereby resulting in an income of Rs 24,23,000/- as per the information available to AO on ITD. In view of the same AO has perused the appellant filling of return of income for this AY 2010-11 and on noticing the same being a non- filer, AO has issued 148 notice as per the due procedure. However, appellant did not file any ROI as needed as a response to this statutory notice by duly explaining the transaction involved in property if any along with supporting proofs as needed to explain appellant contentions as per law. In the absence of same, AO has issued further hearing notices from time to time seeking explanation of transactions in property as reflected in ITD against the appellant for Rs.24,23,000/-. However, for these notices also appellant did not respond and same has resulted in conclusion of assessment by AO by assessing the same as per ITD data as income of the appellant for the AY 2010-11 along with initiation of penalty proceedings u/s.271(1)(C) of I.T Act as explained in these orders by the AO. During the appeal proceedings, as per the submissions appellant is contending that there is no obligation to file such ROI as per the provisions u/s. 139(4A) of I.T Act by the appellant trust as it is below taxable limit. However, there is no such provision not to respond to the statutory notice as issued by the AO u/s. 148 of I.T Act and accordingly appellant contentions that non-filling of ROI is & 378/Ahd/2025 [Jindal Development Foundation Trust vs. ACIT] A.Y. 2010-11 - 7 – justifiable even after issue of 148 notice is neither reasonable nor acceptable. Further on service of notices u/s. 148 and later u/s. 142(1) etc. appellant is contending that no such notice is received by the appellant as appellant is not actively available at the registered address of the trust as given/available to AO/department as there were no substantial activities are carried out by the trust. In view of non-receipt of notices, appellant is justifying non-compliance to AO as reasonable to explain the appellant contention that there exists no taxable income or material with AO warranting initiation of 148 proceedings as well as conclusion of assessment involving the stated addition. This contention of the appellant is neither reasonable nor acceptable as there is no mistake on the part of AO either in issuing the 148 notice as per the due procedure or in issuing these notices to the registered address of the trust as available with the Income Tax Department.”
We have heard both the parties. The assessee has challenged the assumption of jurisdiction by the AO to reopen the case of the assessee on the ground that his belief of escapement of income of the assessee was based on incorrect facts, which he himself found to be so while conducting inquiry regarding the same from independent sources.
The Ld. Counsel for the assessee has demonstrated this fact by pointing out that reopening was resorted to on the information that the assessee had sold immovable property during the impugned year but had not filed any return of income. He has pointed out to us from the assessment order itself that the third party enquiry conducted by the AO from the Sub-Registrar office revealed no transaction of sale of immovable property to have been entered into by the assessee trust during the impugned year.
& 378/Ahd/2025 [Jindal Development Foundation Trust vs. ACIT] A.Y. 2010-11 - 8 –
In the light of the above facts, which have remained uncontroverted before us, we completely agree with the Ld. Counsel for the assessee that the reasons forming belief of escapement of income of the assessee for reopening the case, completely failed as per the AO’s own enquiry and investigation. We agree with the Ld. Counsel for the assessee that the jurisdiction assumed, therefore, by the AO, to frame assessment u/s.147 of the Act was invalid. The assessment order passed, therefore, is quashed.
Ground Nos. 1 to 3 raised by the assessee are allowed as above.
Since, we have quashed the assessment order, other grounds raised by the assessee challenging the merits of the addition made are merely academic and therefore are not being adjudicated by us.
In the result, the appeal of the assessee, therefore, stands allowed in above terms.
We shall now take up ITA No.378/Ahd/2025.
Grounds raised by the assessee are as under:
“1 The order passed u/s. 271(1)(c) is bad in law as well as on facts.
& 378/Ahd/2025 [Jindal Development Foundation Trust vs. ACIT] A.Y. 2010-11 - 9 –
2 The learned AO erred in law as well as on facts in levying the penalty of Rs. 6,49,827 by passing order u/s. 271(1)(c) of the Act without examining and considering material facts available on record. The Hon'ble CIT(A) has erred in confirming the same.”
It was common ground that the impugned appeal pertains to the penalty levied on the assessee on account of addition made to its income in quantum proceedings, which has been dealt with by us in . Since, we have quashed the assessment order, the penalty does not survive . The appeal of the assessee, therefore, is allowed.
In the combined result, both appeals filed by the assessee are allowed.
This Order pronounced on 09/05/2025 Sd/- Sd/- (T.R. SENTHIL KUMAR) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 09/05/2025 S. K. SINHA True Copy आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant ��यथ� / The Respondent. 2. संबं�धत आयकर आयु�त / Concerned CIT 3. 4. आयकर आयु�त(अपील) / The CIT(A)- �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,