INCOME TAX ACT, 1961

Section 147

Reassessment - Validity - Recording of reasons based on an incorrect assumption of fact -

Assessee's assessment was reopened under section 147 on the formation of belief about escapement of income and on the ground that assessee had not filed his return of income for the year under consideration. Held: The first reason for reopening of the assessment was that the assessee had not filed his return of income for the year under consideration. However, on perusal of Paper Book, it was found that the assessee had filed the return of income prior to recording of reasons by the AO. In this background, what has been sought to be pointed out was that the reasons recorded for formation of belief of escapement of income were based on an incorrect fact. The incorrect fact being the return not having been filed by the assessee. It has also been pointed out that even if it is accepted that incorrect noting about the absence of return filed was not the only basis for formation of belief, assessee relied upon the judgment in the case of Sagar Enterprises to contend that in such a situation also, the recording of reasons was untenable. In said case, it was noted that once there was a factually incorrect basis about the formation of belief about escapement of income, such reasons could not be taken to be valid, even if the alternate reasons relied upon may be correct. In such a situation, it could not be said with certainty as to which factor weighed with the AO to form a belief about escapement of income. Thus, as in the instant case, the recording of reasons was based on an incorrect assumption of fact, the same invalidates the formation of belief envisaged under section 147/148.

Followed:Sagar Enterprises v. Asstt. CIT. (2002) 257 ITR 335 (Guj) : 2002 TaxPub(DT) 1549 (Guj-HC) .

REFERRED :

FAVOUR : In favour of assessee

A.Y. : 2010-11

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