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Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI MANOJ KUMAR AGGARWAL
The Revenue is in appeal before the Tribunal against the order of the ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 19.03.2024 passed for assessment year 2011-12.
The Revenue has taken six grounds of appeal, however, its grievance revolves around a single issue, namely, ld. CIT(A) has erred in quashing the assessment order by holding that A.Y.2011-12 2 re-opening by issuance of a notice u/s 148 of the Income Tax Act is invalid.
The brief facts of the case are that assessee has filed its return of income electronically on 01.10.2011 declaring income of Rs.44,940/-. The acknowledgement of the return was bearing No.304453221011011. The AO had issued a notice u/s 148 on 26.03.2018. He has reopened the assessment. The reasons recorded by him are on page No. 7 and 8 of the Paper Book. The proforma sent for approval to the Addl. Commissioner of Income Tax has been placed on page No.9 and 10 of the Paper Book. We take note of the reasons which read as under : 1 The assessee has not filed his return of income for the A. Y. 2011-12. 2. As per AIR information available with this office, during the FY 2010-11 relevant to AY 2011-12, the assessee has made investment to the tune of Rs.4,40,00,000/-. in purchase of immovable property. 3. On analyzing information available, it is seen that the assessee has made investment to the tune of Rs.4,40,00,000/-. in purchase of immovable property during the FY 2010-11 relevant to AY 2011-12..
4. In order to verify the above information, after obtaining approval u/s 1.33(6) of the Income Tax Act,1961 from the Pr. Commissioner of Income Tax , letter seeking information about the return of income and source of investment in immovable property was issued to the assessee on 23-06-2016,14.12.2017 and 12- 03-2018. In response to this asssessee attended the proceedings on 16-03-2018 A.Y.2011-12 3 and furnished the copy of purchase deed. The assessee has not furnished any explanation with regard to source of investment of Rs.440,00,000/- 5. . The information has been found correct. The assessee has failed to furnish the source of investment of Rs.4,40,00,000/- in purchase of property despite the fact that sufficient opportunities were given to him.
The assessee has made investment to the tune of Rs.4,40,00,000/-. in purchase of immovable property, during the FY 2010-11 relevant to AY 2011-12. The assessee company has failed to furnish the source of investment in purchase of immovable property. Thus the assessee is found possession of Rs.4,40,00,000/- which were taxable in the hands of the assessee. Therefore the income of Rs. 4,40,00,000/-. has escaped assessment in the hands of the assessee. The assessee has not filed any return of income for the AY 2011-12. I have therefore reasons to believe that income amounting to Rs.4,40,00,000/-. has escaped assessment in the case of the assessee for the Assessment Year 2011-12. Moreover, the income has escaped assessment in view of failure on the part of the assessee to file a return of income u/s 139 0" the IT. Act. The proviso to section 147 of the IT Act is clearly applicable in the case of the assessee.
7. In this case no return of income was filed for the year under consideration. Accordingly, in this case, no assessment was made and the only requirement to initiate proceeding u/s 147 is reason to believe which has been recorded in para 6 above.
8. It is pertinent to mention here that in this case the assessee has chosen not to file return of income for the year under consideration although the total income of the assessee has exceeded the maximum amount which is chargeable to tax as discussed in paragraph 6 above and the assessee was assessable under the Act. In view of the above, the provisions of clause (a) of Explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. In this case more than four years have lapsed form the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 has been obtained separately from Principal Commissioner of Income Tax as per the provisions of section 151 of the Act.”
On the basis of the above reasons, assessment was reopened. The AO, thereafter, passed the assessment order u/s 143(3) on 29.12.2018. This assessment is read with A.Y.2011-12 4 Section 147 which has not been noted by the AO. The ld. AO has determined the taxable income of the assessee at Rs.5,65,56,040/-.
5. Dissatisfied with the assessment order, assessee carried the matter in appeal before the CIT(A). The ld. CIT(A) has quashed the re-opening by recording following finding : “9. From the copy of the reasons as reproduced above, it has been mentioned by the Assessing Officer that the assessee has not filed his return of income for Asstt. Year 2011-12 in paragraph-1 and then in paragraph 6, it has again been reiterated that since the assessee did not file any return a income for Asstt. Year 2011-12 and, therefore, there is reason to believe that the income amounting to Rs. 4.40 crores has escaped assessment am further, the very basis of initiation of proceedings u/s 148 are that since then is failure on the part of assessee to file the return u/s 139 of the Income Tax, the provisions of section 147 of the Act, are clearly applicable and then then in para 7 & 8, it has been mentioned that since no return has been filed for the year under consideration and, therefore, as per the provisions of clause (a) of explanation-2 of section 147 are applicable to the facts of the case and, therefore, the Assessment year under consideration is deemed to be case where the income chargeable to tax has escaped assessment. 10. Thus, from the above said facts, it is very much obvious that the Assessing Officer has misled himself in recording wrong reason to believe that the income of the assessee has escaped assessment on account of failure on the part of assessee to file the return u/s 139(1). Whereas on the contrary, the assessee had filed his return of income as is evident from the Assessment order at apge-1, wherein, the Assessing Officer has himself stated as under: - "Return declaring income of Rs.44,940/- was filed by the assessee electronically on 01.10.2011 vide acknowledgement No. 3044533221011011." 11. The assessee had also in response to notice u/s 148 contended the same vide acknowledgement Number as per assessment order and as stated by the assessee in response to notice u/s 148 is the same. Further, in response to letter u/s 133(6), the assessee had replied to the Assessing officer and A.Y.2011-12 5 provided the copy of the sale deed and clarified that the land has been purchased by the company and all the payments had been made through bank account of the company and the audited balance sheet, was filed alongwith the original return of income filed on 01.10.2021 and, thus, before recording of the reasons and issuance of notice u/s 148, it was very much in the knowledge of the Assessing Officer that the assessee had disclosed such property in the audited balance sheet and, thus, there was no failure on the part of assessee in not finishing the return u/s 139(1) and, thus, the Assessing Officer has mislead himself for form reason to believe that the income of the assessee has escaped assessment, since the assessee has not filed the return u/s 139(1) and there was failure on the part of the assessee to file the return u/s 139(1).
It is a settled law that the reason to believe is sine quo for assumption of jurisdiction u/s 148 and if there is wrong reason to believe then the very initiation of proceedings u/s 148 are bad in law as per judgment of Apex Court in the case of ITO Vs Lakhmi Mewal Dass reported in 103 ITR 457, in which, it has been held that there has to be nexus of the reason to believe and material available with the AO and which in present case is none as per reasons. Reliance is being further placed on the following judgments:- Sagar Enterprises vs. ACIT (2002) 257 ITR 335 (Gujarat High Court) "Notice u/s 148 issued on the ground of factually incorrect basis that the assessee had not filed its return could not be sustained even on the basis of alternative reason since it could not be said with certainty as to which factor weighed with the concerned officer when he issued the impugned notice and when the respondent authority was himself unsure as to the year of taxability of the income which is stated to be undisclosed income." Harjeet Singh Vs ITO (ITAT Delhi), order dated 12.11.2018, in "In my considered opinion, the basis of reopening itself is based on wrong facts therefore, the same cannot be upheld. I accordingly set aside the notice u/s 148 of the Act the reassessment based on such notice deserves to be quashed. Since the assessment itself, has been quashed the other ad-hoc disallowance stand deleted.
In the result, the appeal filed by the assessee is allowed." "Thus, the ITAT opined that the reasons recorded for initiation of proceedings under section 147/148 was arbitrary and bad in law and therefore assessment framed consequent thereto was obviously illegal and void ab initio and liable
ITA No.606/CHD/2024 A.Y.2011-12 6 to be quashed. Accordingly, the order of the CIT(A) was set aside and re- assessment proceedings held bad in law." KMV Collegiate Sr. Sec. School v. ITO (2017) 163 ITD 653 (Asr.) (Trib) From the above discussion, it is evident that both the reasons recorded by the AO for reopening the completed assessments of the assessee are based on factual errors, rendering the notice issued u/s 147, finding its basis in the aforesaid reasons, to be an invalid notice, in keeping with the decision of the Hon'ble Supreme Court in 'Kelvinator of India Ltd.' (supra), as considered in 'Dr.Ajit Gupta' (supra). Consequently, all proceedings pursuant thereto, culminating in the impugned order for the A.Y. 2007-08, are also held to be null and void. Baba Kartar Singh Dukki Educational Trust v. ITO (2016) 158 ITD 965 (Chd.)(Trib.) Apparently, AO proceeded for re-opening of assessment for nonexistent and factually incorrect reasons and had not applied his mind and did not verify assessment records/returns of income submitted by Assessee prior to recording of reasons—AO had taken irrelevant fact into consideration and reopened assessments on basis of suspicion —AO also proceeded for re- opening of assessment on non-existent and factually incorrect basis/reasons and had not applied his mind and did not verify assessment records/returns filed by Assessee prior to recording of reasons—Re-opening of assessments was invalid and liable to be set aside/quashed—Appeals allowed. Van Oord Dredging and Marine Contractors BV V/s ADIT, in - MUM-TRIBUNAL The AO has reopened the assessment on incorrect facts and further the assessing officer has failed to demonstrate that there was failure on the part of the assessee to disclose fully and truly all material facts during the course of original assessment proceedings. Hence the reopening of assessment of AY 2005-06 is liable to be quashed on these two grounds also. Accordingly we set aside the order passed by Ld CIT(A) on this issue and hold that the reopening of assessments of both the 'ears are not in accordance with the law and accordingly quash the assessment orders passed for both the years under consideration. Shri Ram Mohan Rawat V/s Income Tax Officer in - JAIPUR-TRIB Accordingly, in view of the above facts and circumstances of the case, when the AO has initiated the proceedings on the basis of non-existent and factually incorrect facts and reasons without application of mind and without verification of the facts available on record, then the proceedings initiated A.Y.2011-12 7 under section 147/148 are not sustainable in law. The same are set aside and consequential reassessment order is quashed.
6. Since the reopening is set aside and quashed, therefore, the ground no. 2 raised on the merits of the addition becomes infructuous. INTHIS CASE THE JUDGMENT OF CHANDIGARH BENCH OF BABA KARTAR SINGH DUKKI EDUCATIONAL TRUST V/S ITO 158 ITD 0965 HAS BEEN CONSIDERED AND FOLLOWED. Shri Allen De Noronha V/s ACIT, in - LUCKNOW-TRIB The objections of the assessee stating that certain wrong facts are recorded that is also not categorically rebutted by the Department. We are, therefore, of the considered view as per our aforesaid discussion based on the case laws and on the factual matrix, we hold that reasons recorded for initiation of proceedings under section 147/148 is arbitrary and bad in law and therefore assessment framed consequent thereto is obviously illegal and void ab initio and liable to be quashed. We accordingly set aside the order of the Id. CIT(A) and hold re- assessment proceedings bad in law and also directing quashing of the re- assessment order. Fortune Metaliks Limited vs DCIT, dated 12.01.2021 - CHD Trib. Reliance is also placed on the judgment of Hon'ble Jurisdictional ITAT "A" Bench, in which, the similar facts were there and on the basis of such incorrect facts, the formation of belief has been drawn and the finding has been given by the Hon'ble Bench in para 7 onwards of the order and for your ready reference, the para-7 is being reproduced herewith as under:-
"7. We have heard both the parties. We find merit in the contention of the Id. counsel for the assessee that the reassessment proceedings undertaken by the AO in the present case were invalid since the reasons recording his satisfaction of escapement of income were based on incorrect facts and there was no application of mind at all by the AO. The fallacies in the facts pointed out by the Id. counsel for the assessee, regarding the quantum of bogus purchases noted by the AO in his reasons as also name of one of the parties, has not been disputed or controverted by the Revenue. Further, even the fact recorded by the AO in the reasons that the bogus bills had been debited to the Profit & Loss Account was incorrect which is evident from the fact that the Id. CIT(A) in his order passed on merits has found these bills to be relating to purchase of fixed assets and has accordingly, made the disallowance of only depreciation relating to the same, which has not been challenged by the Revenue before us. 11 is clearly evident that on receiving information from the Commercial Tax Department, the Id. AO did not even care to verify the same from his records from where al I these factual inaccuracies would have been brought out. There was clearly total non- application of mind by the AO and the belief of escapement of income is A.Y.2011-12 8 definitely not his own but borrowed from that of the commercial tax officer who had forwarded the information.
The basic requirement of law for reopening an assessment is application of mind by the AO to the material or information in his possession to conclude and arrive at a satisfaction therefrom that income has escaped assessment. Both application of mind and sat is faction /belief of the AO are lacking in the pre sent case. The reassessment therefore we hold is invalid. The case laws relmd upon by the Ld. Counsel for the assessee support the case of the assessee, The order passed by the AO is, therefore, set aside." Reliance is also being placed on the judgment of Chandigarh Bench of the ITAT in the case of Smt. Sarika Jain & Others vs. ITO (2016) 46 ITR (Chd Trib.) 246
This judgment of the Chandigarh Bench has been followed in the cases of Sh. PremSagar Jain in in the case of Sh. Kamal Kant Jain in and in the case of Sh. Narinder Kumar Jain in ITA No. 72/CHD/2015 for AY 2006-07.
Further to that the case of the case of the assessee is directly covered by the recent judgment of The Hon'ble Jurisdictional Bench of ITAT Chandigarh in the case of Smt. Monika Rani in dated 28.02.2020, wherein it has held as under: "10.6 In the present case also the A.O. reopened the assessment on the basis of wrong facts, so respectfully following the ratio laid down in the aforesaid referred to cases, I am of the view that the reopening of the assessment in the present case was not valid, accordingly, the same is quashed. Similarly, the case is also covered by the judgement of the Hon’ble Amritsar Bench of ITAT Amritsar (Jalandhar Camp), in the case of Gaurav Joshi Vs ITO as rep9orted at (2019) 55 CCH 0083, wherein it has been held as under : "Held, AO while issuing notice u/s 148 had mentioned that assessee had deposited cash during FY 2009-10 in bank account which had escaped assessment—On contrary, in assessment order, he mentioned that cash deposited in assessee's bank account was less than amount mentioned in reopening notice—Therefore, reasons recorded by AO were not emerging from record available with him—AO recorded reasons which were not found to exist on record, therefore, reassessment framed deserved to be quashed—Assessee's appeal allowed." Further reliance is placed on the judgement of the Hon'ble Jurisdictional High Court in the case of CIT vs. Atlas Cycle Industries reported at 180 ITR 319, which has been relied upon by the Jalandhar Bench of IT AT Amritsar in the case of Gaurav Joshi (Supra) and wherein it has been held as under:
ITA No.606/CHD/2024 A.Y.2011-12 9
"9. Adverting to the question referred regarding the reassessment proceedings, we are of the view that the Tribunal was right in cancelling the reassessment as both the grounds on which reassessment notice was issued were not found to exist, and the moment such is the position, the ITO does not get the jurisdiction to make a reassessment. This view of ours finds support from the Supreme Court decisions in CIT vs. A. Raman & Co. (1968) 67 ITR 11 (SC) and Bankipur Club Ltd, vs. CIT 1972 CTR (SC) 245 : (1971) 82 ITR 831 (SC). Similar view has been taken by the Rajasthan High Court in Addl. CIT vs. Ganeshilal Lal Chand (1984) 43 CTR (Rai) 120 : (1985) 154 ITR 274 (Raj)., On behalf of the Revenue, CIT vs. Ahmedabad Manufacturing and Calico Printing Co. Ltd. 1976 CTR (Gui) 214 : (1977) 106 ITR 159 (Gui), a decision of the Gujarat High Court was cited. On a consideration of the matter, we are of the view that in view of the aforesaid Supreme Court decisions, the view taken by the Rajasthan High Court is correct and the view taken by the Gujarat High Court is not correct. Accordingly, we dissent from the view taken by the Gujarat High Court and in view of the decisions of the Supreme Court and Rajasthan High Court, we hold that the ITO did not* have the jurisdiction to proceed with the reassessment, the moment he found the two grounds mentioned in the reassessment notice incorrect or non- existent. Accordingly, we answer the referred question in favour of the assessee, in the affirmative, that the Tribunal was right in cancelling the reassessment. "
After going through the above said facts of the case and the settled legal position and the said judgments of Jurisdictional Bench of the ITAT, Chandigarh Bench, Chandigarh and others and particularly the fact that the Assessing Officer was not justified in assuming the proceedings u/s 148 on the basis of wrong/incorrect facts and, thus, he had wrongly assumed the jurisdiction and hence the assessment as made by the AO is liable to be quashed.
The another point raised by the Ld. Counsel of the assessee is that the Assessing Officer has blindly relied upon the AIR information without making any requisite enquiry and thus, when there is no application of mind by the concerned AO and solely on the basis of AIR information, the assumption of jurisdiction by the Assessing Officer is not proper and for that, the assessee has relied upon the following judgments:- i) M/s Holy Faith International vs. DCIT in order dated 15.01.2019(Amritsar Bench) ii). Principal Commissioner of lncome-tax-6 vs. Meenakshi Overseas (P.) Ltd. in OF 2016 dated 26.05.2017 iii). Principal Commissioner of Income-tax vs. RMG Polyvinyl (I) Ltd. in ITA No. 29 OF 2017 dated 07.07.2017 iv) Mahavir Parsad vs ITO in ITA No. 924/Del/2015 order dated 09.10.2017
ITA No.606/CHD/2024 A.Y.2011-12 10
I find myself in agreement with the above arguments of the ld. Counsel of the assessee. Thus, it is held that both on the issue of wrong reasons recorded by the Assessing and wrong reasons to believe and the AO did not apply his mind but only relied upon the AIR information, the proceedings as initiated by the AO are bad in law and the assumption of jurisdiction of the AO is not maintainable at all and , as such, consequent assessment as made by the AO deserves to be quashed.
The next ground on which, the submissions have been made about the mechanical approval as accorded by the Ld. PCIT-2, Chandigarh and for that the approval as granted by the Ld. PCIT-2 is also mechanical in the sense that in the Column for according sanction to the issuance of notice u/s 148 in the column 16 (1) and 16(b) as reproduced above, it has been mentioned that the assessee has not filed any return of income u/s 139 or 142(1) and then, the fact of the mechanical approval is further borne out from Column 22 of the said proforma, where the PCIT has accorded her satisfaction on the basis that no return of income has been filed and, thus, it is a fit case for approval u/s 151 and most of the column in paragraph 22 are already typed and only some blank columns have been filled, which proves that it is only a mechanical approval by the PCIT and in view of the above said judgements as cited by the assessee and also the recent judgment of Chandigarh Bench of the ITAT in the case of Ever shine Recreation Pvt. Ltd. Vs DCIT (2023) 107 ITR Trib. 65, it is held that the PCIT has not applied his mind, while according the sanction to the issuance of notice u/s 148 and, thus, the issuance of notice and assumption of jurisdiction by the Assessing Officer u/s 148 is void ab-initio and consequently, the assessment as framed by the AO is quashed on both the grounds. As regards the other grounds of appeal
s are concerned regarding the admission of additional evidence and also addition on account of unsecured loan and disallowance of cash expenditure u/s 40(3), since I have already allowed the necessary relief on the legal issue regarding the assumption of jurisdiction u/s 148 and thus, I am not inclined to discuss other grounds.
17. Conclusion : In the result, the appeal is Allowed for statistical purpose”
6. The ld. CIT DR while impugning the order of ld. CIT(A) contended that there was no scrutiny assessment passed in the present case. If the return was filed by the assessee, then that must have been processed only under Section 143(1) of A.Y.2011-12 11 the Act but these issues have never been examined in a scrutiny assessment. She relied upon order of the AO.
7. The ld. counsel for the assessee, on the other hand, submitted that no doubt, scrutiny assessment was not framed but formation of belief by the AO that income has escaped assessment is based on erroneous assumptions of the facts. If reasons are carefully read, then it would reveal that in the first line of the reasons, AO has observed that assessee has not filed the return. Similarly, he has intimated this fact to the Addl. CIT in column No. 16B of the proforma sent for approval. Against the question “whether material facts were not disclosed by the assessee in the said return ?” AO has observed that return was not filed. Therefore, ld.CIT(A) has rightly quashed the re-opening of the assessment. He relied upon the judgement of Hon'ble Bombay High Court in the case of BIC Cello (India) Pvt. Ltd. Vs ACIT 475 ITR 463, Tata Sons Ltd. Vs DCIT reported in 137 taxmann.com 414 and Ankita A. Choksey Vs ITO reported in 411 ITR 207 (Bombay High Court). Apart from these judgements, he has relied upon a large
ITA No.606/CHD/2024 A.Y.2011-12 12 number of other orders of the ITAT which are placed on the Paper Book running into 192 pages. Index of the Paper Book reads as under : PARTICULARS PAGES S. No. RE-OPENING PURELY ON THE BASIS OF THE AIR INFORMATION 1. Copy of order in the case of Gaurav Joshi vs. Income Tax Officer in 1-6 dated 16.01.2019 2. Copy of order in the case of Amritsar Bench of the ITAT in the case of Amrik Singh vs 7-32 Income Tax Officer in
3. Copy of order in the case of M/s Holy Faith International vs. DCIT in ITA No. 33-47 181/Asr/2017 order dated 15.01.2019(Amritsar Bench) 4. Copy of order in the case of Principal Commissioner of lncome-tax-6 vs. Meenakshi 48-59 Overseas (P.) Ltd. in ITA No. 692 OF 2016 dated 26.05.2017 5. Copy of order in the case of Principal Commissioner of Income-tax vs. RMG Polyvinyl (I) 60-66 Ltd. in ITA No. 29 OF 2017 dated 07.07.2017 RE-OPENING ON THE BASIS OF WRONG FACTS 6. Copy of order in the case of M/s. Kissan Fats Limited V/s. DCIT in ITA 67-81 NO.407/CHD/2023 vide order dated 01.07.2024.
Copy of order in the case M/s. Fortune Metaliks Ltd. V/s. DCIT in ITA 82-90 No.1090/CHD/2019 vide order dated 12.01.2021 8. Copy of order in the case of Regalia Jewels Pvt. Ltd. vs. DCIT/ACIT, Central Circle, 91-93 Dehradun order dated 09.04.2025 (ITAT Dehradun) 9. Copy of order in the case of Shri Manish Jain vs ITO in ITA No. 755/Chd/2012 dated 94-101 16.04.2013 10. Copy of order in the case of Shri Satnam Singh vs DCIT in ITA No. 102-109 144/Chd/2016 order dated 26.09.2016 11. Copy of order in the case of KMV Collegiate Sr. Sec. School v. ITO (2017) 163 ITD 653 110-121 (Asr.) (Trib.) 12. Copy of order in the case of Baba Kartar Singh Dukki Educational Trust v. ITO (2016) 122-134 158 ITD 965 (Chd.)(Trib.) 13. Copy of order in the case of Smt Monika Rani vs ITO (W-2),Kurukhetra in ITA No. 135-145 582/CHD/2019 MECHANICAL APPROVAL BY CIT U/SEC. 151 OF THE ACT: 14. Copy of order in the case of Rosha Alloys P Ltd. vs DCIT as reported in 175 taxmann.com 146-183 622 (Chandigarh - Tnb.) 15. Copy of order in the case of Mohd. Shafiq Cement Store vs ITO as reported in 168 184-192 taxmann.com 72 (Amritsar - Trib.)
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We have duly considered the rival contentions and gone through the record carefully. A bare perusal of Section 147, as was applicable in the case of the assessee for assessment year 2011-12 (prior to Finance Act 2021) would reveal that this Section contemplates that “if the AO has reasons to believe that any income chargeable to tax has escaped assessment for any assessment year………..” The expression used in the opening line of the Section would provide that AO should have information which has a direct live nexus with the formation of belief that income has escaped assessment. The Hon'ble Bombay High Court in the case of Tata Sons Ltd. as well as in the case of Ankita A. Choksey Vs ITO has taken note of the fact that if return has been accepted u/s 143(1), it would not automatically authorize the AO to reopen the assessment. We would like to make reference to the following observations from the judgement in Tata Sons Ltd. : "6. If we consider the table reproduced, the sale of shares of TCS Ltd. which according to Respondent No. 1 should be treated as 'business income' and not 'profits arising out of sale of investment', is only Rs. 19,32,34,27,592/- (Rs. 12,26,61,28,794/- + Rs. 7,05,72,98,798/-, i.e., "Long Term Capital Gains - Tata Consultancy Services Limited". Mr. Pinto though made valiant attempt to defend the notice issued for reopening, in fairness, as an officer of the Court, considering the reasons as recorded agreed that the only item which could have A.Y.2011-12 14 been stated to have escaped assessment would be the Long Term Capital Gains in the sale of TCS Ltd. shares amount to Rs. 19,32,34,27,592/- and Respondent No. 1 was incorrect in stating that he had reason to believe that the sum of Rs.22,71,25,79,374/- has escaped assessment.
7. In our view, if the reasons for reopening the assessment is based on incorrect facts or conclusions, certainly the notice issued for reopening cannot be sustained. Moreover, if according to Respondent No. 1 only the sale of shares of TCS Ltd. was 'business income' and not 'profits arising of sale of investment' to say that the amount of Rs. 22,71,25,79,374/- has escaped assessment, also indicates non-application of mind. We would also go a step ahead and observe that if only the approving authority under Section 151 of the Act had considered the reasons properly, either he would have directed Respondent No. 1 to re-work on the reasons or would not have granted the approval. Moreover, we may keep in mind this is a case where the scrutiny assessment was completed and order under Section 143(3) of the Act has been passed followed by a rectification order under Section 154 of the Act. Therefore, Petitioner's case has been considered at two stages, (i) When the assessment order was passed after scrutiny under Section 143(3) of the Act and (ii) When an order under Section 154 of the Act was passed. (emphasis supplied)"
8.1 Similarly, we take note of the observations of Hon'ble Bombay High Court from the judgement of Ankita A. Choksey Vs ITO : "6. It is a settled position in law that the Assessing Officer acquires jurisdiction to issue a reopening notice only when he has reason to believe that income chargeable to tax has escaped assessment. This basic condition precedent is applicable whether the return of income was processed under Section 143(1) of the Act by intimation or assessed by scrutiny under Section 143(3) of the Act. Further, the reasons to believe that income chargeable to tax has escaped assessment must be on correct facts. If the facts, as recorded in the reasons are not correct and the assessee points out the same in its objections, then the order on objection must deal with it and prima-facie, establish that the facts stated by it in its reasons as recorded are correct. In the absence of the order of objections dealing with the assertion of the assessee that the correct facts are not as recorded in the reason, it would be safe to draw an adverse inference against the Revenue.
7. Thus, we are of the view that even in cases where the return of income has A.Y.2011-12 15
been accepted by processing under Section 143(1) of the Act, reopening of an assessment can only be done when the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. The mere fact that the return has been processed under Section 143(1) of the Act, does not give the Assessing Officer a carte blanche to issue a reopening notice. The condition precedent of reason to believe that income chargeable to tax has escaped assessment on correct facts, must be satisfied by the Assessing Officer so as to have jurisdiction to issue the reopening notice. In the present case, the Assessing Officer has proceeded on fundamentally wrong facts to come to the reasonable belief/conclusion that income chargeable to tax has escaped assessment. Further, even when the same is pointed out by the Petitioner, the Assessing Officer in his order disposing of the objection does not deal with factual position asserted by the Petitioner. Thus, it would be safe to conclude that the Revenue does not dispute the facts stated by the Petitioner. On the facts as found, there could be no reason for the Assessing Officer to believe that income chargeable to tax has escaped assessment. (emphasis supplied)"
8.2 The Hon'ble Bombay High Court has adopted identical analogy in the judgement of BIC Cello (India) Ltd. The other judgements relied upon by the ld. counsel for the assessee are also on the same line. Therefore, if we peruse the reasons in the line of above judgements, then it would reveal that AO has not applied his mind on any of the information. The moment he got the information from Annual Information Return Wing, without cross-verifying it, recorded the reasons and issued notice to the assessee. It is pertinent to note that if AO assumed that return was not filed, then this assumption would goad him on incorrect formation of opinion. It
ITA No.606/CHD/2024 A.Y.2011-12 16 suggests that he has not verified the information received by him from the AIR and treated such information as a gospel truth, which is not permissible u/s 147. The transmission of information to the AO is only for the purpose that AO would apply his mind independently and then form an opinion that income has escaped assessment. This information is for setting the machinery into motion, but for re-opening an assessment, it is the opinion of the AO which should be based on a reasonable application of mind exhibiting the escapement of income. The AO has started his formation of belief on a wrong foundation of facts. Similarly, the approval granted by the Addl. Commissioner of income Tax is also in a mechanical manner because once she was not apprised with complete facts, then how he could approve it. He was also informed that assessee has not filed the return. That would give an indication that both the authorities were not possessing the complete record of the assessee pertaining to the assessment of this year. Therefore, we are of the view that ld. CIT(A) has rightly applied his mind and rightly quashed the re-opening of A.Y.2011-12 17 the assessment. We do not find any error in the order of the ld. CIT(A). Accordingly, this appeal of the Revenue is devoid of merit and is dismissed.
In the result, appeal is dismissed.