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Facts
The assessee's appeals for AY 2012-13, 2013-14, and 2014-15 were based on reassessment proceedings initiated by the AO. For AY 2012-13, the AO alleged non-filing of return and escapement of interest income, which the assessee contested by providing proof of filing and offering a lower interest income that was accepted.
Held
The Tribunal held that the reassessment proceedings for AY 2012-13 were vitiated due to being based on a wrong assumption of facts and incorrect quantum of income. As the reassessments for AY 2013-14 and 2014-15 stemmed from the AY 2012-13 proceedings, they were also quashed.
Key Issues
Whether reassessment proceedings initiated on factual inaccuracies and a wrong premise are legally sustainable, and if subsequent reassessments stemming from such flawed initial proceedings are also liable to be quashed.
Sections Cited
147, 143(3), 148
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Income Tax Appellate Tribunal, “B” BENCH, CHANDIGARH
Before: HON’BLE SHRI RAJPAL YADAV & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
(िनधा�रण वष� / Assessment Year: 2013-14) & 3. आयकर अपील सं. / (िनधा�रण वष� / Assessment Year: 2014-15) Shri Prem Singh DCIT Circle Palampur बनाम/ The Palace, Chamba Palampur (HP) - 176061 Vs. Chamba (HP) -176310 �ायीलेखासं./जीआइआरसं./PAN/GIR No. AAMPR-8876-P (अपीलाथ�/Appellant) : (��थ� / Respondent) Assessee by : Shri Ajay Jain (CA) - Ld. AR Revenue by : Shri Vinod Kumar Chaudhary (Addl. CIT) - Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 13-11-2025 घोषणाकीतारीख /Date of Pronouncement : 17/11/2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeals by assessee have identical facts. First, we take up appeal for Assessment Year (AY) 2012-13 which arises out of an order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 10-07-2025 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) r.w.s.
147 of the Act on 27-11-2019. The Ld. AR advanced arguments on legal grounds and contended that the reopening proceed on misconception of facts. The Ld. Sr. DR also advanced arguments supporting the orders of lower authorities. Having heard rival submissions and upon perusal of case records, our adjudication would be as under.
The assessee’s case was reopened and notice u/s 148 was issued on 19-02-2019 wherein it was alleged that the assessee did not file its return of income for this year whereas as per Form 26AS, the assessee earned bank interest income of Rs.103.27 Lacs. Having formed opinion of escapement of income, the case was reopened. Though the assessee objected to reopening along with copy of Income Tax Return as filed on 03-07-2012, Ld. AO rejected the same. However, it was observed that the assessee earned interest income of Rs.57.65 Lacs and the same was already offered to tax in the return of income filed in response to notice u/s 148 and therefore, no adverse inference was drawn on this issue.
The assessee earned receipts of Rs.13.01 Lacs from tourism / tour operating business and claimed expenditure of Rs.47.27 Lacs. However, Ld. AO alleged that no business was done and accordingly, the expenditure was denied to the assessee and gross receipts of Rs.13.01 Lacs were brought to tax.
The Ld. CIT(A) rejected the legal ground by observing that as per extant rules, the assessee was required to e-file the return of income and the physical return was not found verifiable from the records. The denial of business expenditure was also confirmed on merits. Aggrieved, the assessee is in further appeal before us.
From recorded reasons as extracted in the assessment order, it is quite clear that the formation of belief of escapement of income proceeds on wrong assumption of facts. While recording the reasons for reopening, the Ld. AO has alleged that the assessee did not file return of income whereas Form 26AS indicated that the assessee earned interest income of Rs.103.27 Lacs. Both these facts are found to be erroneous. The assessee had already filed physical return on 03-07-2012 with Additional Commissioner, Palampur wherein the assessee had already disclosed interest income of Rs.57.65 Lacs. The copy of the same was already filed during assessment proceedings but the same was rejected merely on the ground that the return was not verifiable from the records. There is no evidence to disbelieve the factum of filing of return of income by the assessee. Another fact is that Ld. AO has alleged that interest income of Rs.103.27 Lacs escaped assessment but ultimately accepted the interest income of Rs.57.65 Lacs as offered by the assessee in return of income filed in response to notice issued u/s 148. The Hon’ble Gujarat High Court in the case of Vijay Harishchandra Patel vs. ITO (400 ITR 167), on identical facts, quashed the reopening by observing that the very foundation of reopening would collapse on wrong misconception of facts. The Hon’ble Court further held that since the reopening belief was formed on a factually incorrect premise, the reopening proceedings would not survive. In our opinion, this decision duly supports the case of the assessee. In the present case, Ld. AO has proceeded on wrong misconception of the fact that the assessee did not file its return of income whereas the assessee demonstrated that it had, in fact, had filed, regular return of income on 03-07-2012. The plea was rejected merely on the ground that the return was not verifiable. Secondly, the quantum of interest income alleged to have escaped assessment is also wrong. The Ld. AO alleged that interest income of Rs.103.27 Lacs escaped assessment whereas the actual interest income as earned by the assessee was Rs.57.65 Lacs only which ultimately stood accepted by Ld. AO. Therefore, considering the facts of the case, we would hold that since the reassessment proceedings proceeded on misconception of facts, the same stood vitiated in law. We order so. The Ld. AO is directed to accept the regular return of income as filed by the assessee. The appeal stand allowed on this very legal ground. Assessment Years 2013-14 & 2014-15 6. The reassessment proceedings for AY 2013-14 have been initiated considering the view taken in reassessment proceedings for AY 2012-13. For this year, the assessee filed regular return of income on 26-12-2014 and the case was reopened vide notice u/s 148 dated 30-03-2021. The case was reopened to disallow the business expenditure as per view taken in AY 2012-13. The Ld. AO finally denied business expenditure and brought to tax gross receipts of Rs.15.24 Lacs. The Ld. CIT(A) confirmed the assessment on similar lines. Aggrieved, the assessee is in further appeal before us.
Similarly, the reassessment proceedings for AY 2014-15 have been initiated considering the view taken in reassessment proceedings for AY 2012-13. For this year, the assessee filed regular return of income on 26- 12-2014 and the case was reopened vide notice u/s 148 dated 30-03- 2021. The case was reopened to disallow the business expenditure as per view taken in AY 2012-13. The Ld. AO finally denied business expenditure and brought to tax gross receipts of Rs.15.28 Lacs. The Ld. CIT(A) confirmed the assessment following its order for AY 2013-14. Aggrieved, the assessee is in further appeal before us.
It is quite clear that the reassessment proceedings for both these years stem from reassessment proceedings as initiated by Ld. AO for AY 2012-13. However, the reassessment proceedings for AY 2012-13 stand quashed by us on legal grounds and thus, the very foundation of reopening for both these years stand collapsed and accordingly, the reasons for reopening would not survive for both these years also. The Ld. AO is left with no tangible material to justify reopening of the case of the assessee and accordingly, the assessment for AYs 2013-14 & 2014- 15 stands quashed. We order so. Conclusion 9. All the appeals stand allowed in terms of our above order. Order pronounced on 17/11/2025 Sd/- Sd/- (RAJPAL YADAV) (MANOJ KUMAR AGGARWAL) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 17/11/2025 आदेश की �ितिलिप अ�ेिषत /Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF ASSISTANT REGISTRAR
ITAT CHANDIGARH