The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that the AO under guise of power to re-open Assessment cannot undertake a fishing or roving inquiry or seek to verify the claim like a scrutiny officer.
The Assessee, Inderjeet Kohli is an individual who is stated to be having income from business, house property, capital gains and other sources. Assessee had filed his original return of income for A.Y. 2011-12 declaring loss. Subsequently, the AO has noted in the assessment order that information was received from the office of ADIT (Inv.), New Delhi about assessees having rental income from various properties and the income from such properties was not disclosed by the Assessee.
The assessee is challenging the assumption of jurisdiction for reopening the assessment under section 147/148 of Act and also challenging on merits the addition made. The law on re- opening of an assessment under the Act, is fairly settled. The Assessing Officer (AO) can re-open an assessment only in accordance with the express provisions provided in Section 147/148 of the Act. It is only on the AO strictly satisfying the provisions of Section 147 of the Act that he acquires jurisdiction to re-open an assessment. Section 147 of the Act, clothes the AO with jurisdiction to reopen an assessment on satisfaction that the AO must have reason to believe that Income chargeable to tax has escaped the assessment and In cases where the assessment sought to be reopened is beyond the period of four years from the end of the relevant assessment year, then an additional condition is to be satisfied viz: there must be failure on the part of the Assessee to fully and truly disclose all material facts necessary for assessment.
It is a settled law that the reasons which are recorded by the Assessing officer for reopening an assessment are the only reasons which can be considered when the formation of the belief is impugned and that the reasons which are recorded by the A.O. for reopening the assessment are the only reasons which can be considered and no substitution or deletion is permissible. The reading of the reasons placed by the assessee in the Paper Book shows that there is not even an allegation that there was any failure on the part of the assessee to disclose any material facts which lead to any income chargeable to tax had escaped the assessment. Further, even on the reading of the reasons recorded, it cannot be said that it suggests about any failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment.
The coram of Accountant Member, Anil Chaturvedi held that for a mere verification of the claim, the power of re- opening of the assessment could not be exercised and it further observed that AO under the guise of power to re-open the assessment cannot seek to undertake an undertaking a fishing or roving inquiry or seek to verify the claim as if he is the scrutiny officer.
“I am of the view that in the present case, notice for re-opening of the assessment u/s 147 of the Act is not as per the mandate of Sec.147 of the Act and therefore the re-opening is not permissible. I am therefore of the view that the notice issued for reopening has to be set aside and the same deserves to be quashed,” the ITAT noted.
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