Reassessment without fresh material with AO to believe that income has escaped is invalid

Reassessment without fresh material with the Assessing Officer to believe that income has escaped assessment is invalid

ABCAUS Case Law Citation:
ABCAUS 2938 (2019) (05) ITAT

Important Case Laws Cited/relied upon by the parties
Income Tax Officer, Ward 2(4) Vs. Chetna Surana 

In the instant appeal, the assessee had taken the legal grounds that no satisfaction had been recorded by the Assessing Officer before passing re-assessment order u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (the Act).

The grievance of the assesse was that there was no “reason to believe” arrived at by the Assessing Officer for resorting to re-assessment order u/s.147 of the Act.

The Tribunal observed that the reasons recorded by the Assessing Officer before making reassessment u/s 147 of the Act were nothing but stating facts which were already in front of the Assessing Officer at the time of original assessment. There was no new material with the Assessing Officer to believe that income has escaped assessment.

The Tribunal stated that the Assessing Officer has no power to make roving enquiry. It was noted that the Hon‟ble Jurisdictional High Court had observed that the Income Tax Officer had not set out any reason for coming to the conclusion that it was a fit case for issuing notice under section 148 of the Act. The material that he had before him for issuing notice had not been mentioned. The facts contained in the communications which had been received were only referred to vaguely and all that he had said was already on record. The words “reason to believe” suggests that the belief must be that of an honest and reasonable person based upon reasonable grounds and that Income Tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income Tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section.

The Tribunal opined that the “reasons to believe” which requires for making the assessment u/s.147 and prior to that even issuing notice u/s 148 of the Act should be based on some specific reasons after conducting necessary enquiry in the matter. The “reasons to believe” should be such which could stand alone irrespective of other facts that was already on record.

There is provision of scrutiny assessment u/s 143(3) of the Act however, the legislative intent was that there must be some case where income may escape assessment and for that purpose section 147/148 of the Act was incorporated in the Act whereby after issuance of notice u/s.148 of the Act, re-opening can be done and reassessment order can be passed u/s.147 of the Act.

The Tribunal pointed out that the provision of section 147 had come with the limitation of “reasons to believe” and without this “reasons to believe”, re-assessment proceedings cannot be undertaken. Further, the scrutiny assessment proceedings has to be done u/s 143(3) of the Act and thereafter, only if some new materials are discovered, the Assessing Officer can strongly form a “reason to believe” and as per reasons recorded by him that income has escaped assessment then only he can resort to the provisions of section 147/148 of the Act.

The Tribunal stated that the Assessing Officer is not permitted to resort to reassessment proceeding for the purpose of verification or for conducting any roving enquiry.

Accordingly, following the principle laid down by the Hon‟ble Jurisdictional High Court , the Tribunal allowed the legal grounds of the assessee and also the appeal.

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