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Facts
The assessee challenged reassessment proceedings for AY 2011-12, initiated by the AO under Section 147/148 based on the belief that the assessee had not filed a return of income and had not disclosed a property sale. However, the assessee had filed a valid return of income under Section 139(1) and 139(5) for the said AY, declaring the income and the property transaction.
Held
The Tribunal found that the AO's 'reason to believe' for initiating reassessment was based on incorrect facts, as the assessee had already filed an ITR. Consequently, the notice issued under Section 148 and all subsequent reassessment proceedings were held to be invalid and void ab initio and were quashed. The impugned additions were deleted, and other grounds of appeal became academic.
Key Issues
Whether reassessment proceedings initiated under Section 147/148 were valid when the Assessing Officer's 'reason to believe' was based on incorrect facts, specifically that the assessee had not filed an income tax return for the relevant assessment year.
Sections Cited
250, 147, 144, 148, 50C, 133(6), 151, 139(1), 139(5), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR “SMC” BENCH : JAIPUR
Before: DR. MANISH BORAD
ORDER This appeal at the instance of assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi [“CIT(A)”], dated 03/02/2025 passed u/s. 250 of the Income Tax Act, 1961 (for short, 'the Act') arising out of A.Y. 2011-12 framed u/s. 147 r.w.s. 144 of the Act dated 06/12/2018 by the ACIT, Ward-6(1), Jaipur.
2. The assessee has made three fold arguments in the grounds of appeal
; firstly, challenging the assessment of jurisdiction u/s. 148 of the Act and that the reassessment proceedings are bad in law; secondly, Ld.CIT(A) erred in setting aside the assessment order in spite of having all the documents filed before him and the Ld.CIT(A) ought to have decided the issues on merits; and, thirdly, against the addition of Rs. 4,34,406/- which has been wrongly calculated and that the benefit of indexed cost of acquisition and 2. ITA.No.682/JPR/2025 (Sakshi Sharma) other expenses incurred for acquiring the property has not been allowed and that addition has been made in the hands of the co-owner.
3. At the outset, learned counsel for the assessee referring to the legal issue, challenging the jurisdiction assumed u/s. 148 of the Act stated that Ld.AO has issued notice u/s.148 of the Act on observing that the assessee has not filed the return of income and has not disclosed transaction of sale of immovable property. But this observation of Ld.AO is totally incorrect because the assessee has filed his return of income and also disclosed the transaction. Therefore, in absence of any proper reason to believe, notice issued u/s. 148 is bad in law and, therefore, the subsequent proceedings carried out are also illegal and bad in law. In support of his contention, a reference was made to the written submissions filed before the Ld.CIT(A) along with placing reliance on various decisions referred therein furnished on 12/05/2023 and copy of the same is placed in paper book at page Nos. 82-92.
4. On the other hand, ld. DR supported the orders of Ld.CIT(A), but failed to controvert this contention that prior issuance of notice u/s. 148 of the Act, the assessee had duly furnished the return u/s. 139(1) of the Act disclosing the alleged transaction.
5. I have heard rival contentions and perused the material on record. I observe that the assessee is an individual and regular return of income for A.Y.2011-12 has been furnished on 13/07/2011 declaring income of Rs. 1,45,360/-, which has been subsequently revised on the very same day declaring same total
3 ITA.No.682/JPR/2025 (Sakshi Sharma) income along with claiming current year loss of Rs. 21,217/- from sale of immovable property located at Plot No.2/469, Jawahar Nagar, Jaipur. I further observe that the Ld.AO issued a notice u/s. 148 of the Act on 26/03/2018 and the reasons recorded for reopening are reproduced below:-
“1. Brief details of the assessee: The assessee is an Individual and during the year under consideration assessee sold an immovable property for a total consideration of Rs. 1011000/-, which has been valued at Rs.1121562/- for purpose of stamp duty valuation by the Sub-Registrar. The assessee has not filed his/her return of income.
Brief details of information collected/received by the A.O. The information has been received from the office of Pr. Commissioner of Income Tax-II, Jaipur vide his office letter No. 726 dated 08.07.2011, and 1216 dated 30.07.2012 respectively along with CDs. It was further gathered that this sale deed is related to the assessee and he/she sold immovable property, wherein liability to pay capital gain u/s 50C arises.
Analysis of information collected/received: During the F.Y. 2010-11, the assessee sold immovable property vide registered deed dated 09/Sep/10 and on verification of records, it is found that as per AST no return of income has been filed for the A.Y. 2011-12.
Enquiries made by the A.O. as sequel to information collected /received: The specific information was received from the office of Pr. Commissioner of Income Tax-II, Jaipur. After getting approval for Pr. CIT-2, Jaipur vide letter No.2658 dated 06.02.2018 notice u/s 133(6) was issued to assessee to furnish necessary information regarding Capital Jain on sale of above property, but no compliance was made by him.
Findings of the A.O. As the transaction of property made by the assessee was proved through registered sale deed and on verification of records, it is found that assessee has not filed his/her return of income. Therefore it is a fit case for initiation of assessment proceeding for escapement of income by the assessee.
6. Basis of information reason to believe and details of escapement of income: As per information received by the office of the Pr. Commissioner of Income Tax-II, Jaipur, it was gathered that this sale deed is related to assessee and he/she made immovable property sale transaction wherein liability to pay capital gain u/s 50C arises. As per record, the assessee has not filed his/her return of income and also not declared any capital gain. Thus, I have reason to believe that that income of Rs.1121562/-has escaped assessment within the meaning of Section 147 of the Income-tax act 1961.
Escapement of income chargeable to tax relation any assets (including financial interest in any entity): As of now, no, such information is available in respect of the assessee.
4 ITA.No.682/JPR/2025 (Sakshi Sharma) 8. Applicability of the provisions of section 147/151 to the facts of the case: in this case, no return of income was filed for the year under consideration accordingly, so case no assessment was made and the only requirement to initiate proceedings u/s 147 is reason to believe which has been recorded above. 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 had exceeded the maximum amount which is not chargeable to tax as discussed 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. More than four years have lapsed from the end of the assessment consideration. Hence, necessary sanction to issue the notice u/s 148 is being obtained from Principal Commissioner of Income Tax as per the provisions of section 151 of the Act.”
On going through the above referred reasons recorded for issuance of notice u/s. 148, alleging escapement of income and that too carryout the re-assessment proceedings, I note that Ld.AO has referred to a transaction of sale of immovable property and has also observed that assessee has not filed his/her return of income. Admittedly, reopening has been carried out after 04 years from the end of the A.Y. 2011-12. In the given scenario, the assessee has admittedly filed valid return of income u/s. 139(1) and 139(5) of the Act on 13/07/2011 and has also declared the alleged transaction in the return of income. Now, the Ld.AO in the given facts could have issued notice u/s.148 of the Act and initiated the reassessment proceedings after expiry of 04 years from the end of the relevant assessment year, in case the income chargeable to tax has escaped assessment for which assessment year by reason for failure on the part of the assessee to make a return u/s. 139 or in response to a notice issued u/s. 142(1) or 148 or to disclose fully and truly all material facts necessary for that assessment year.
5 ITA.No.682/JPR/2025 (Sakshi Sharma) 7. Now in the given case, the assessee has furnished the valid return of income u/s. 139(5) and the alleged transaction of sale of immovable property has been declared therein. Therefore, the Ld.AO in the instant case grossly erred in ignoring the income-tax return filed by the assessee and further grossly erred in believing that there is an escapement of income as the assessee has not filed the return. Now, the very foundation for carrying out the re- assessment proceedings that the assessee has not filed income tax return, is incorrect. Therefore, the Ld.AO in the instant case has issued notice u/s. 148 of the Act on wrong facts and has erred in assuming jurisdiction without adhering to the provision to section 147 of the Act for carrying out the reassessment proceedings after four years from the end of the relevant assessment year by not bringing any material on record to prove that the assessee has either not filed return of income or has not disclosed material information in the income tax return. Since the very foundation for carrying out the reassessment proceedings are faulty and incorrect, therefore, in my considered view, Ld.AO had grossly erred in not conducting proper enquiry and proper application of mind prior to issuance of notice u/s. 148 of the Act. Therefore, notice u/s. 148 of the Act is invalid and bad in law and therefore all subsequent proceedings carried thereafter are also held to invalid and void ab initio and are hereby quashed. In support of this finding, I place reliance on the judgment of the Hon'ble Gujarat High Court in the case of Mumtaz Hazi Mohamad Memon vs. ITO 408 ITR 268 (Guj.) and Vijay Harishchandra Patel vs ITO 400 ITR 167 (Guj.); and also the decision of this Tribunal in the case of Smt. Sushila Chahch vs.
6 ITA.No.682/JPR/2025 (Sakshi Sharma) ITO in dt. 30/03/2021. Accordingly, the legal issue raised in ground No.1 stands allowed.
So far as remaining grounds are concerned, since I have already quashed the reassessment proceedings, the impugned additions stand deleted and dealing with the remaining grounds would be merely academic in nature and therefore, the same are dismissed as academic in nature.
In the result, appeal of the Assessee is allowed as per the terms indicated hereinabove.
Order pronounced in the open Court on 14.08.2025.