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Facts
The appellant's assessment for A.Y. 2013-14 was reopened under Sections 147/148, with the notice issued on 31.03.2021, beyond the four-year period. The department failed to demonstrate that the assessee did not fully and truly disclose all material facts, and the "reasons to believe" along with supporting information were not shared with the assessee.
Held
The Tribunal held that the reassessment proceedings were invalid, void ab initio, and quashed them. It found that the department failed to meet the conditions of the first proviso to Section 147 for reopening beyond four years and violated principles of natural justice by not sharing the "reasons to believe" and underlying information with the assessee.
Key Issues
1. Validity of reassessment proceedings initiated beyond four years without proving the assessee's failure to disclose material facts under Section 147. 2. Violation of natural justice due to non-supply of "reasons to believe" and supporting information to the assessee.
Sections Cited
Section 147, Section 148, Section 143(3), Section 139, Section 142(1), Section 151, Section 132(4)
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Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM
The captioned appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, Delhi dated 10.06.2025 for the assessment year 2013-14 as per the grounds of appeal on record.
2. In this case, the assessee has filed both legal grounds as well as grounds on merits. The Ld. Counsel for the assessee submitted that he would assail the legal ground first and if the said legal ground is answered affirmative, then the grounds on merits shall become academic only.
3. In so far as the legal ground is concerned, the Ld. Counsel for the assessee has submitted that the reopening of the assessment u/s. 147/148 of the Income Tax Act, 1961 (for short ‘the Act’) was done beyond the period of four years from the end of the relevant assessment year. Demonstrating the same, the Ld. Counsel brought to notice of the Bench at Page 69 of the paper book, wherein notice u/s. 148 of the Act as issued to the assessee for A.Y.2013-14 and the time period from the end of the relevant assessment year and the date of issuance of the notice which is 31.03.2021, therefore, such notice has been issued beyond four years from the end of the relevant assessment year. Further, the Ld. Counsel referred to the “reasons to believe” for the reopening of the case which is annexed at Pages 126 to 130 of the paper book. The Ld. Counsel on reading of the entire “reasons to believe” submitted that the department has not brought out any failure on the part of the assessee for not disclosing fully and truly all material facts necessary for the assessment proceedings. In fact, there is no whisper at all in the entire “reasons to believe” regarding any failure on the part of the assessee for not disclosing fully and truly all material facts relevant for the assessment. That as per the “1st proviso” to Section 147 of the Act as would be applicable for A.Y.2013-14, if the reopening has been done beyond the period of four years, the revenue must demonstrate that there is failure on the part of the assessee for not disclosing fully and truly all material facts relevant for the assessment. In this regard, the conditions enshrined in the “1st proviso” to Section 147 of the Act has not been fulfilled by the department. For the sake of completeness, the “1st proviso” to Section 147 of the Act is culled out as follows: “147. Income escaping assessment.—If the Assessing Officer has reason to believe" that any income chargeable to tax has escaped assessment" for any assessment year, he may", subject to the provisions of sections 148 to 153, assess or reassess" such" income "and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings" under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this 'section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material fact necessary for his assessment, for that assessment year……”
4. That on the similar facts and circumstances, I take guidance from the decision of the Hon’ble Jurisdictional High Court in the case of Hariom Ingots and Power Pvt. Ltd. Vs. Pr. CIT (2022) 444 ITR 306 (C.G.). In the said decision, the Hon’ble Jurisdictional High Court had held as follows: “6…………. For issuance of notice under Section 148 of the I.T. Act, there should be tangible material and mandatory compliance of Section 147 of I.T. Act. Proceedings of reassessment has been initiated against company after lapse of 4 years of submission of return, which is not in dispute. Under first proviso to Section 147 of the I.T. Act, for starting the reassessment proceedings after lapse of 4 years, Assessing Officer has to record his conclusion that there was failure on the part of assessee in not disclosing fully and truly all material facts necessary for assessment of that particular assessment year, which is not appearing from the reading of the Annexure i.e. reasons for issuance of notice. 7. Considering the aforementioned facts and circumstances of the case, reason assigned for issuance of notice and provisions mentioned therein, in the opinion of this Court, there was no reason/ground available with Assessing Officer to issue notice under Section 148 of the I.T. Act. Issuance of notice under Section 148 of the I.T. Act to petitioner is not in accordance with the first proviso to Section 147 of the I.T. Act, therefore, it is not sustainable, which is liable to be quashed and it is hereby quashed. 8. The writ petition is accordingly allowed.”
5. In the aforesaid binding decision, it has been laid down by the Hon’ble Jurisdictional High Court that when reassessment proceedings are initiated after lapse of four years, in such case as per the “1st proviso” to Section 147 of the Act, the A.O has to record his satisfaction that there was failure on the part of assessee disclosing fully and truly all material facts necessary for assessment for that particular assessment year. That when there was no satisfaction available with the A.O with regard to the “1st proviso” to Section 147 of the Act, in such scenario, issuance of notice u/s. 148 of the Act itself is not in accordance with the provisions of the Act thereby liable to be quashed. The writ petition of the assessee was allowed.
Further, I find that ITAT, Raipur “DB” Bench in the case of the 6. Avanindra Nath Agrawal Vs. DCIT, Circle-1(1), Raipur, dated 22.07.2025 had dealt with the similar issue observing as follows: “4. At the same time, the department has failed to bring on record any evidence suggesting any failure on the part of the assessee for disclosing truly and fully all material facts necessary for assessment. In this regard, the Ld. Sr. DR was directed to furnish report from the A.O and the said report was placed by her on record. The relevant submission of the A.O as per the said report is extracted as follows: “(2) The reassessment proceedings have to be invoked within a span of 4 years however in the case of the assessee the same was reopened after 6 years. As per old provisions of the Act, Notice u/s. 148 could be issued for 4 years from the end of A.Y. Further, Notice u/s. 148 could have been issued upto 6 years from the end of A.Y in cases where income escaping assessment is Rs.1 lakh or more. Since, in the case of the assessee income escaping assessment for A.Y.2012-13 is Rs.61,65,450/- which is more than Rs.1 lakh therefore the case of the assessee was rightly reopened within 6 years by issuing notice u/s. 148 of the Act, dated 31.03.2019.”
As evident, it is admitted by the department that the case of the assessee was reopened after 6 years. It is also the contention of the A.O that notice u/s. 148 of the Act can be issued upto 6 years from end of the assessment year in cases where income escaping assessment is Rs.1 lakh or more and since in the case of the assessee income escaping assessment for A.Y.2012-13 is Rs.61,65,450/- which was more than Rs.1 lakh therefore, the case of the assessee was rightly reopened within 6 years by issuing notice u/s. 148 of the Act, dated 31.03.2019.
In this regard, let us refer to relevant provision of Section 147 of the Act which deals with the contended issue before us: “147. Income escaping assessment.—If the Assessing Officer has reason to believe" that any income chargeable to tax has escaped assessment" for any assessment year, he may", subject to the provisions of sections 148 to 153, assess or reassess" such" income "and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings" under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this 'section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material fact necessary for his assessment, for that assessment year……”
6. That as evident as applicable to the assessment year in question i.e. A.Y.2012-13 wherein assessment has been completed for the relevant assessment year, no action shall be taken as per this provision after expiry of 4 years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material fact necessary for his assessment, for that assessment year. None of the limbs applies to the case of the assessee nor the revenue has able to place on record any evidence regarding any failure on the part of the assessee “to disclose truly and fully all material facts necessary for assessment.” At the same time, ground taken by the A.O justifying the reopening beyond the period of 6 years saying that whenever there is a case where income escaping assessment is Rs.1 lakhs or more, in such cases, notice u/s. 148 of the Act could have been issued upto 6 years from the end of the assessment year, however, no such limb emanates from the said proviso to Section 147 of the Act and therefore, this reason as stated by the A.O is not emanating from the statute, hence, the said observation is perverse and infructuous and does not contain legal validity. We find that the Hon’ble Supreme Court in its recent order passed in the case of Union of India Vs. Rajeev Bansal (2024) 469 ITR 46 (SC) had, inter alia, observed that the order passed without jurisdiction is nullity. It was further observed that if a statute expressly confers a power or imposes a duty on a particular authority, then such power or duty must be exercised or performed by that authority itself. Elaborating further, the Hon’ble Apex Court had observed that any exercise of power by statutory authorities inconsistent with the statutory prescription is invalid. Apart from that, it was observed that as there cannot be any waiver of a statutory requirement or provision that goes to the root of the jurisdiction of assessment, therefore, any consequential order passed or action taken will be invalid and without jurisdiction. For the sake of clarity, the observations of the Hon’ble Apex Court are culled out as under: “xxxx xxxx xxxx xxxx xxxx
If a statute expressly confers a power or imposes a duty on a particular authority, then such power or duty must be exercised or performed by that authority itself. (Dr. Premachandran Keezhoth Vs. Chancellor, Kannur University). Further, when a statute vests certain power in an authority to be exercised in a particular manner, then that authority has to exercise its power following the prescribed manner (CIT Vs. Anjum M.H. Ghaswala; State of Uttar Pradesh Vs. Singhara Singh). Any exercise of power by statutory authorities inconsistent with the statutory prescription is invalid…………. xxxx xxxx xxxx xxxx xxxx 32. A statutory authority may lack jurisdiction if it does not fulfil the preliminary conditions laid down under the statute, which are necessary to the exercise of its jurisdiction. (Chhotobhai Jethabhai Patel and Co. V. Industrial Court, Maharashtra Nagpur Bench). There cannot be any waiver of a statutory requirement or provision that goes to the root of the jurisdiction of assessment. (Superintendent of Taxes Vs. Onkarmal Nathmal Trust). An order passed without jurisdiction is a nullity. Any consequential order passed or action taken will also be invalid and without jurisdiction. (Dwarka Prasad Agrawal V. B.D. Agrawal). Thus, the power of assessing officers to reassess is limited and based on the fulfilment of certain preconditions. (CIT Vs. Kelvinator of India Ltd.)” Therefore, considering the facts that viz. (i) reopening was done beyond the period of 6 years; (ii) department has not proved any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment; (iii) the A.O has stated frivolous invalid ground justifying the action of the department, therefore, such reassessment proceedings initiated beyond the period of 6 years is invalid, void ab initio, hence quashed. 7. Since the reassessment is quashed thereafter all the other proceedings becomes non-est in the eyes of law. As the legal issue has been answered in favour of the assessee therefore the grounds on merits becomes academic only. 8. As per the aforesaid terms the grounds of appeal raised by the assessee stands allowed.
In the result, appeal of the assessee is allowed.”
Therefore, applying the aforesaid ratio to the present legal parameter as emanating in the present case of the assessee, on this legal ground itself, the assessee gets relief. Essential parameter of the “1st proviso” to Section 147 of the Act has not been complied with in the case of the assessee and the department has not been able to prove any failure on the part of the assessee, whereas, admittedly, the reopening was done beyond the period of four years which is also written by the Revenue Authority in the heading “Applicability of the provisions of Section 147/151 to the facts of the case” and the same reads as follows:
Assessee has filed his return of income for the A.Y.2013-14 but concealment of income is found. This case is within six years from the end of the assessment year under consideration. Accordingly, the proposal to issue notice under section 148 for the A.Y.2013-14 is being submitted in the case of the assessee for kind perusal and necessary approval as per the provisions of section 151 of the Income tax Act, 1961.
If you have any objections to the reopening you are requested to submit the same within one week of receipt of this notice. In case no objection is received it will be assumed that you have no objection to continuing with the reassessment proceedings and details will be submitted.
Please submit the nature of business and computation of income for AY 2013-14.
Please submit profit and loss account and balance sheet highlighting the above transactions for AY 2013-14 4. Please submit the nature and details of the source of Rs 25,00,000/- with reference to reasons of reopening.
5. Please give name, address, Pan, email , ledger account, confirmation, creditworthiness of the persons related to loan of 25 lakhs.
Please submit the bank details of the banks used in FY 2012-13. Also submit bank statement reflecting above transaction. You are requested to submit details within one week as this is a time barring faceless assessment. Sd/- Yours faithfully, Additional/Joint/Deputy/Assistant Commissioner of Income Tax/ Income-tax Officer, National Faceless Assessment Centre, Delhi”
Therefore, in own admission of the department, in the present case reopening has been done within six years from the end of the relevant assessment year under consideration. That without pointing out any failure on the part of the assessee for not disclosing truly and fully all material facts necessary for assessment, reopening done beyond the period four years is itself violative of the “1st proviso” to Section 147 of the Act. Further, from perusal of the “reasons to believe”, it is evident that it is mentioned in the heading “Brief details of information available….” that “this office is in possession of credible information that the assessee has taken accommodation entry………….”. In this regard, the assessee submitted that what exactly are those credible informations in possession of the department that has never been communicated to the assessee. In other words, the revenue has charged the assessee based on certain informations without providing any opportunity to the assessee with regard to the same. Therefore, it had acted on putting liability on the assessee based on certain informations which was never shared with the assessee and accordingly, it is violative of principles of natural justice. It is settled legal position that where the materials referred to in the “reasons to believe” by the A.O was not supplied to the assessee for his response, the entire proceedings for reopening of the assessment gets vitiated as there is no reasonable opportunity provided to the assessee therefore effecting the base of principles of natural justice in income tax proceedings.
9. In this regard, I refer to the judgment of the Hon’ble High Court of Rajasthan, Jodhpur Bench in the case of Micro Marbles Private Limited Vs. Office of the Income Tax Officer (2023) 475 ITR 569 (Raj.) wherein on the similar issue the Hon’ble High Court has held and observed as follows:
“31. Thus, in the light of the decisions of the Delhi and the Bombay High Courts, as referred to above, the non-supply of the material, especially the documents of entry in the books of M/s Sanmatri Gems Pvt. Ltd. and the statement of Deepak Jain recorded under Section 132 (4) of the Act, is sufficient to vitiate the proceedings.
It may be noted that the statement recorded under Section 132 (4) of the Act can be used in evidence for making the assessment only if such statement is made in context with other evidence, or material discovered during search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger the assessment.
In view of the aforesaid facts and circumstances, we are of the opinion that shorn of all other technical aspects which may have been raised before us, the very fact that the material referred to in the "reasons to believe" was not supplied to the petitioner, the entire proceedings for the reopening of the assessment and leading to the consequential assessment stand vitiated in law.”
Further, the Hon’ble Bombay High Court in the case of Tata 10. Capital Financial Services Limited Vs. Assistant Commissioner of Income Tax Circle & Ors., while deciding Writ Petition No.546/2022 vide judgment and order dated 15.02.2022, had directed the Revenue to adhere to certain guidelines in reopening the assessment proceedings. It emphasized that the Assessing Officer shall not merely state the reasons to believe in the letter addressed to the assessee, but if the reasons make reference to any other document or a letter or a report, such document or letter or report should be enclosed to the reasons. Therefore, in view of the aforesaid decision also, it is mandatory on the part of the Assessing Officer to supply the assessee with all relevant documents, referred to in the reasons to believe and the reassessment order so that the assessee may file proper objections opposing such reopening of the assessment.
Therefore, there emerges two basic principles from the aforesaid judicial pronouncements. Firstly, that the reopening done beyond the period of four years without specifying any failure on the part of the assessee for not disclosing fully and truly all material facts, is violative of the “1st proviso” to Section 147 of the Act; and secondly, informations that has been used against the assessee by the department was never shared with the assessee which is again violative of principles of natural justice. Therefore, on both these counts, reassessment proceedings becomes arbitrary, invalid, bad-in-law and void ab initio, hence quashed.
Since the reassessment itself is quashed thereafter all the other proceedings becomes non-est as per law. As the legal issue has been answered in favour of the assessee therefore the grounds on merits becomes academic only.
As per the aforesaid terms the grounds of appeal raised by the assessee stands allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in open court on 25th day of August, 2025.