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www.taxpublishers.in Income Tax Act, 1961, Section 147 Reassessment--*Validity--No fresh information or tangible material came into possession of AO subsequent to conclusion of original assessment* *Conclusion:* Where reopening was triggered only on reappraisal and re-verification of Form 26AS of assessee, which was very much available before AO during the course of original assessment proceedings itself and there was absolutely no fresh information or tangible material, which came into possession of AO subsequent to conclusion of original assessment under section 143(1), reassessment proceedings were liable to be quashed. AO reopened assessment under section 147. CIT (A) quashed the reassessment proceedings stating that AO did not have any tangible material with him, which would enable him to form a belief that income of assessee had escaped assessment. *Held:* It is settled law that existence of tangible material is prerequisite for reopening of an assessment and that tangible material should have live link or nexus with formation of belief for AO to conclude that income of assessee had escaped assessment. Admittedly, in instant case, reopening was triggered only on reappraisal and re-verification of Form 26AS of assessee, which was very much available before AO during the course of original assessment proceedings itself and there was absolutely no fresh information or tangible material, which came into possession of AO subsequent to conclusion of original assessment under section 143(1). Hence, reassessment proceedings had rightly been quashed by CIT(A). *Decision:* In assessee s favour *Relied:* CIT, Delhi v. M/s. Kelvinator of India Limited (2010) 320 ITR 561 (SC) : 2010 TaxPub(DT) 1335 (SC) IN THE ITAT DELHI BENCH KUL BHARAT, J.M. & M. BALAGANESH, A.M. ACIT v. Sanjay Pratap Singh ITA No. 4491 and 4492/Del/2019 4 April, 2024 Assessee by: R. K. Singhal, CA Revenue by: Vivek Kumar Upadhyay, Sr. DR ORDER *M. Balaganesh, A. M.* These are the appeals filed by the revenue in ITA Nos.4491/Del/2019 and 4492/Del/2019 for 2009-10, arise out of the orders of the Commissioner of Income Tax (Appeals)-28, New Delhi (hereinafter referred to as learned Commissioner (Appeals) , in short) dated 25-3-2019 against the order of assessment passed under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) dated 29-6-2017 and order dated 18-3-2019 against the order of assessment passed under section 143(3) dated 29-12-2016 by the learned ACIT, Circle-65(1), New Delhi (hereinafter referred to as learned assessing officer ). 2. Let us take up the quantum appeal first in ITA No. 4491/Del/2019 for assessment year 2009-10. The revenue has raised the following grounds of appeal:- 1. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) has grossly erred in allowing the appeal of the assessee and in quashing the assessment under section 147 read with section 143(3) by holding that the notice under section 148 of the Act is invalid without going into the merits of the case. 2. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) has grossly erred in quashing the assessment proceedings under section 147 read with section 143(3) by holding that the assessing officer was not having any information/material in his possession on the basis of which a belief about escapement of income could be formed. 3. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) has grossly erred in holding that the information/material on the basis of which the assessing officer has formed a belief about escapement of income of Rs. 4,28,880 was already available in the assessment records as there was no assessment in the case of the assessee within the meaning of section 2(8) of the Income-tax Act, 1961 and there was no application of mind as the return filed by the assessee for assessment year2009-10 on 25.07.2009 was only processed under section 143(1) of the Income-tax Act, 1961. 4. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) has grossly erred in holding that the assessing officer did not have any tangible material in his possession for the purpose of initiating reassessment proceedings under section 147. 5. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) has grossly erred, in deleting all the additions made by the assessing officer in the assessment order by quashing the reassessment proceedings under section 147. 3. We have heard the rival submissions and perused the material available on record. We find that the return of income for assessment year 2009-10 was filed by the assessee on 25-7-2009 declaring taxable income of Rs. 10,92,498. This assessment was sought to be reopened by issuance of notice under section 148 of the Act on 28-3-2016. The reasons recorded for reopening of assessment are as under:- "As per the Individual transaction statement (26AS) for financial year 2008-09 (assessment year 2009-10) the assessee Shri Sanjay Pratap Singh (PAN: AAOPS3073R) has earned interest income of Rs. 1.82,446 and salary income of Rs. 14,38,932 in assessment year 2009-10. However, assessee has shown salary income of Rs. 9,92,492 and income from other sources of Rs. 2,02,706 in his Income Tax Return filed on 25-7-2009 for assessment year 2009-10. Hence the salary income of Rs. 4,28,880 has not been shown in the said assessment year 2009-10 hence I have reason to believe that Rs 4,28,880 has escaped assessment within the meaning of section 147 of Income Tax Act in the said assessment year 2009-10. 4. The assessment was completed by the learned assessing officer determining total income of Rs. 1,80,16,358 under section 143(3) read with section 147 of the Act on 29-12-2016. Before the learned Commissioner (Appeals), the assessee challenged the validity of reopening of assessment as well as the additions made by the learned assessing officer on merits. The learned Commissioner (Appeals) quashed the reassessment proceedings stating that the learned assessing officer did not have any tangible material with him which would enable him to form a belief that income of the assessee has escaped assessment. The categorical findings recorded by the learned Commissioner (Appeals) in this regard are reflected at para 4.5 and 4.6 of his order which is reproduced herein for the sake of convenience:- 4.5 From the above, it is clear that the assessing officer was not having any tangible material in his possession for the purpose of initiating the reassessment proceedings in the case of appellant. Whatever belief has been formed by him for recording the satisfaction, is based on the Information available in the return of income or provided by the employer in 26AS. But, there is nothing doubtful or suspicious which could Indicate that there is escapement of income on the part of the appellant. The assessing officer has merely taken that information into consideration, quantified the difference and arrived at conclusion that the appellant has escaped the assessment of income. He even failed to verify the reasons for difference which is the main basis of reopening the assessment. This shows that the conduct of assessing officer has been very casual and arbitrary. As held by Hon'ble Jurisdictional High court in the case Pr. CIT vs Meenakshi Overseas Pvt. Ltd (2017) 395 ITR 677 (Del) : 2017 TaxPub(DT) 1791 (Del-HC), the reopening of assessment under section 147 of Income Tax Act is a potent power not to be lightly exercised. It cannot be evoked casually or mechanically. The reasons recorded have to be based on some tangible material and that should be evident from a reading of the observations and the reasons must be self evident and must speak for themselves and the reasons to belief must demonstrate the link between the tangible material and the formation of the belief or the reason to believe that Income escaped assessment. It has been further held by Hon'ble Court that the assessing officer, being a quasi-judicial authority, is expected to arrive at a subjective satisfaction independently on objective criteria for recording the reasons to assume the jurisdiction under section 147 of Income Tax Act. 4.6 In view of the above, it is held that neither the assessing officer was having any tangible material in his possession nor could he establish any live link between the said material and formation of belief in the case of appellant. He has merely verified and reviewed the information already available in records and formed a belief that the income has escaped assessment on the case of the appellant. In such situation, the initiation of assessment proceedings under section 147 of the Act and issuance of notice under section 148 of the Act are not valid in the case of appellant. Consequently, the reassessment proceedings in the said section are also held invalid. It is, therefore, held that reopening of assessment proceedings and subsequent assessment proceedings in the case of the appellant are bad in law and without jurisdiction and deserve to be quashed. I, therefore, quash the reassessment proceedings and allow the grounds taken by the appellant. 5. From the above findings, it could be seen that the learned Commissioner (Appeals) had categorically recorded an observation that the entire reopening was triggered by the learned assessing officer only on perusal of the Form 26AS which is already on record before the learned assessing officer. Hence, there is absolutely no tangible material or fresh material providing tangible information to the learned assessing officer to form a reasonable belief that income of the assessee had escaped assessment. 6. The learned Departmental Representative merely argued before us that original return was processed under section 143(1) of the Act and that there was no need for any tangible material for the learned assessing officer to reopen the proceedings under section 147 of the Act when the assessment was completed originally under section 143(1) of the Act. We are unable to comprehend ourselves to accept this proposition of the learned Departmental Representative. In our considered opinion, the existence of tangible material is prerequisite for reopening of an assessment and that tangible material should have live link or nexus with formation of belief for the learned assessing officer to conclude that income of the assessee had escaped assessment. Under these circumstances alone, the assessment could be reopened by the learned assessing officer. This view of ours is fortified by the decision of the Hon'ble Supreme Court in the case of Kelvinator of India Ltd. reported in (2010) 320 ITR 561 (SC) : 2010 TaxPub(DT) 1335 (SC). Admittedly, in the instant case, the reopening has been triggered only on reappraisal and re-verification of Form 26AS of the assessee which was very much available before the learned assessing officer during the course of original assessment proceedings itself and there was absolutely no fresh information or tangible material that had come into the possession of the learned assessing officer subsequent to conclusion of original assessment under section 143(1) of the Act. We hold that the learned Commissioner (Appeals) had rightly quashed the reassessment proceedings on which we do not deem it fit to interfere. Accordingly, grounds raised by the revenue are dismissed. 7. In the result, the appeal of the revenue in ITA No. 4491/Del/2019 is dismissed. 8. Since, the entire reassessment proceeding is quashed, the concealment penalty levied under section 271(1)(c) of the Act on such quashed reassessment proceedings would have no legs to stand. 9. In the result, both the appeals of the revenue are dismissed. Order pronounced in the open court on 4-4-2024.

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Income Tax Act, 1961, Section 147

Reassessment--Validity--No fresh information or tangible material came into possession of AO subsequent to conclusion of original assessment

Conclusion: Where reopening was triggered only on reappraisal and re-verification of Form 26AS of assessee, which was very much available before AO during the course of original assessment proceedings itself and there was absolutely no fresh information or tangible material, which came into possession of AO subsequent to conclusion of original assessment under section 143(1), reassessment proceedings were liable to be quashed.

AO reopened assessment under section 147. CIT (A) quashed the reassessment proceedings stating that AO did not have any tangible material with him, which would enable him to form a belief that income of assessee had escaped assessment. Held: It is settled law that existence of tangible material is prerequisite for reopening of an assessment and that tangible material should have live link or nexus with formation of belief for AO to conclude that income of assessee had escaped assessment. Admittedly, in instant case, reopening was triggered only on reappraisal and re-verification of Form 26AS of assessee, which was very much available before AO during the course of original assessment proceedings itself and there was absolutely no fresh information or tangible material, which came into possession of AO subsequent to conclusion of original assessment under section 143(1). Hence, reassessment proceedings had rightly been quashed by CIT(A).

Decision: In assessee s favour

Relied: CIT, Delhi v. M/s. Kelvinator of India Limited (2010) 320 ITR 561 (SC) : 2010 TaxPub(DT) 1335 (SC)

IN THE ITAT DELHI BENCH

KUL BHARAT, J.M. & M. BALAGANESH, A.M.

ACIT v. Sanjay Pratap Singh

ITA No. 4491 and 4492/Del/2019

4 April, 2024

Assessee by: R. K. Singhal, CA

Revenue by: Vivek Kumar Upadhyay, Sr. DR

ORDER

M. Balaganesh, A. M.

These are the appeals filed by the revenue in ITA Nos.4491/Del/2019 and 4492/Del/2019 for 2009-10, arise out of the orders of the Commissioner of Income Tax (Appeals)-28, New Delhi (hereinafter referred to as learned Commissioner (Appeals) , in short) dated 25-3-2019 against the order of assessment passed under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) dated 29-6-2017 and order dated 18-3-2019 against the order of assessment passed under section 143(3) dated 29-12-2016 by the learned ACIT, Circle-65(1), New Delhi (hereinafter referred to as learned assessing officer ).

2. Let us take up the quantum appeal first in ITA No. 4491/Del/2019 for assessment year 2009-10. The revenue has raised the following grounds of appeal:-

1. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) has grossly erred in allowing the appeal of the assessee and in quashing the assessment under section 147 read with section 143(3) by holding that the notice under section 148 of the Act is invalid without going into the merits of the case.

2. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) has grossly erred in quashing the assessment proceedings under section 147 read with section 143(3) by holding that the assessing officer was not having any information/material in his possession on the basis of which a belief about escapement of income could be formed.

3. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) has grossly erred in holding that the information/material on the basis of which the assessing officer has formed a belief about escapement of income of Rs. 4,28,880 was already available in the assessment records as there was no assessment in the case of the assessee within the meaning of section 2(8) of the Income-tax Act, 1961 and there was no application of mind as the return filed by the assessee for assessment year2009-10 on 25.07.2009 was only processed under section 143(1) of the Income-tax Act, 1961.

4. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) has grossly erred in holding that the assessing officer did not have any tangible material in his possession for the purpose of initiating reassessment proceedings under section 147.

5. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) has grossly erred, in deleting all the additions made by the assessing officer in the assessment order by quashing the reassessment proceedings under section 147.

3. We have heard the rival submissions and perused the material available on record. We find that the return of income for assessment year 2009-10 was filed by the assessee on 25-7-2009 declaring taxable income of Rs. 10,92,498. This assessment was sought to be reopened by issuance of notice under section 148 of the Act on 28-3-2016. The reasons recorded for reopening of assessment are as under:-

"As per the Individual transaction statement (26AS) for financial year 2008-09 (assessment year 2009-10) the assessee Shri Sanjay Pratap Singh (PAN: AAOPS3073R) has earned interest income of Rs. 1.82,446 and salary income of Rs. 14,38,932 in assessment year 2009-10. However, assessee has shown salary income of Rs. 9,92,492 and income from other sources of Rs. 2,02,706 in his Income Tax Return filed on 25-7-2009 for assessment year 2009-10. Hence the salary income of Rs. 4,28,880 has not been shown in the said assessment year 2009-10 hence I have reason to believe that Rs 4,28,880 has escaped assessment within the meaning of section 147 of Income Tax Act in the said assessment year 2009-10.

4. The assessment was completed by the learned assessing officer determining total income of Rs. 1,80,16,358 under section 143(3) read with section 147 of the Act on 29-12-2016. Before the learned Commissioner (Appeals), the assessee challenged the validity of reopening of assessment as well as the additions made by the learned assessing officer on merits. The learned Commissioner (Appeals) quashed the reassessment proceedings stating that the learned assessing officer did not have any tangible material with him which would enable him to form a belief that income of the assessee has escaped assessment. The categorical findings recorded by the learned Commissioner (Appeals) in this regard are reflected at para 4.5 and 4.6 of his order which is reproduced herein for the sake of convenience:-

4.5 From the above, it is clear that the assessing officer was not having any tangible material in his possession for the purpose of initiating the reassessment proceedings in the case of appellant. Whatever belief has been formed by him for recording the satisfaction, is based on the Information available in the return of income or provided by the employer in 26AS. But, there is nothing doubtful or suspicious which could Indicate that there is escapement of income on the part of the appellant. The assessing officer has merely taken that information into consideration, quantified the difference and arrived at conclusion that the appellant has escaped the assessment of income. He even failed to verify the reasons for difference which is the main basis of reopening the assessment. This shows that the conduct of assessing officer has been very casual and arbitrary. As held by Hon'ble Jurisdictional High court in the case Pr. CIT vs Meenakshi Overseas Pvt. Ltd (2017) 395 ITR 677 (Del) : 2017 TaxPub(DT) 1791 (Del-HC), the reopening of assessment under section 147 of Income Tax Act is a potent power not to be lightly exercised. It cannot be evoked casually or mechanically. The reasons recorded have to be based on some tangible material and that should be evident from a reading of the observations and the reasons must be self evident and must speak for themselves and the reasons to belief must demonstrate the link between the tangible material and the formation of the belief or the reason to believe that Income escaped assessment. It has been further held by Hon'ble Court that the assessing officer, being a quasi-judicial authority, is expected to arrive at a subjective satisfaction independently on objective criteria for recording the reasons to assume the jurisdiction under section 147 of Income Tax Act.

4.6 In view of the above, it is held that neither the assessing officer was having any tangible material in his possession nor could he establish any live link between the said material and formation of belief in the case of appellant. He has merely verified and reviewed the information already available in records and formed a belief that the income has escaped assessment on the case of the appellant. In such situation, the initiation of assessment proceedings under section 147 of the Act and issuance of notice under section 148 of the Act are not valid in the case of appellant. Consequently, the reassessment proceedings in the said section are also held invalid. It is, therefore, held that reopening of assessment proceedings and subsequent assessment proceedings in the case of the appellant are bad in law and without jurisdiction and deserve to be quashed. I, therefore, quash the reassessment proceedings and allow the grounds taken by the appellant.

5. From the above findings, it could be seen that the learned Commissioner (Appeals) had categorically recorded an observation that the entire reopening was triggered by the learned assessing officer only on perusal of the Form 26AS which is already on record before the learned assessing officer. Hence, there is absolutely no tangible material or fresh material providing tangible information to the learned assessing officer to form a reasonable belief that income of the assessee had escaped assessment.

6. The learned Departmental Representative merely argued before us that original return was processed under section 143(1) of the Act and that there was no need for any tangible material for the learned assessing officer to reopen the proceedings under section 147 of the Act when the assessment was completed originally under section 143(1) of the Act. We are unable to comprehend ourselves to accept this proposition of the learned Departmental Representative. In our considered opinion, the existence of tangible material is prerequisite for reopening of an assessment and that tangible material should have live link or nexus with formation of belief for the learned assessing officer to conclude that income of the assessee had escaped assessment. Under these circumstances alone, the assessment could be reopened by the learned assessing officer. This view of ours is fortified by the decision of the Hon'ble Supreme Court in the case of Kelvinator of India Ltd. reported in (2010) 320 ITR 561 (SC) : 2010 TaxPub(DT) 1335 (SC). Admittedly, in the instant case, the reopening has been triggered only on reappraisal and re-verification of Form 26AS of the assessee which was very much available before the learned assessing officer during the course of original assessment proceedings itself and there was absolutely no fresh information or tangible material that had come into the possession of the learned assessing officer subsequent to conclusion of original assessment under section 143(1) of the Act. We hold that the learned Commissioner (Appeals) had rightly quashed the reassessment proceedings on which we do not deem it fit to interfere. Accordingly, grounds raised by the revenue are dismissed.

7. In the result, the appeal of the revenue in ITA No. 4491/Del/2019 is dismissed.

8. Since, the entire reassessment proceeding is quashed, the concealment penalty levied under section 271(1)(c) of the Act on such quashed reassessment proceedings would have no legs to stand.

9. In the result, both the appeals of the revenue are dismissed.

Order pronounced in the open court on 4-4-2024.