The Delhi Bench of Income Tax Appellate Tribunal(ITAT) quashed the assessment for the Assessment Year 2018-19, ruling that the Assessing Officer (AO) improperly assumed jurisdiction under Section 147 due to the non-application of mind.
Reshma Kamal Abichandani,appellant-assessee, the assessment order passed by the AO dated January 29, 2024, for the Assessment Year 2018-19.
A delay of 123 days in filing the appeal was explained by the assessee’s counsel as due to pursuing a rectification application with the Dispute Resolution Panel (DRP), which was later rejected. The tribunal accepted the explanation and admitted the appeal.
The AO had issued a notice under Section 148A(d) on March 31, 2022, stating that the appellant had not filed a tax return and flagged ₹2.15 crore deposited in a State Bank of India account and a property purchase worth ₹5.52 crore.
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In response to an earlier notice, the assessee explained that she had been a non-resident in India since 1997, with no income in India. The bank account was jointly held with her husband, who operated it, and the deposits came from his business in the Philippines. Documents, including bank statements and her husband’s tax returns, were submitted.
Regarding the property, the assessee stated it was primarily in her husband’s name, with her as a co-owner. Payments were made over eight years using her husband’s income from the Philippines, supported by relevant documents.
The revenue counsel supported the orders of the tax authorities, but the tribunal found serious flaws in the AO order under Section 148A(d). The AO failed to address the appellant’s explanation for not filing a return and the flagged transactions, even though the explanation was supported by evidence.
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The appellate tribunal noted that the AO did not apply their mind while passing the order. Under Section 148A, the AO must conduct an inquiry, if needed, and consider all material, including the assessee’s reply, before issuing a notice. The order must include reasons for rejecting the assessee’s explanation.
In this case, the order was vague and lacked reasoning. The AO did not justify why the reopening was necessary despite the assessee’s explanation that the property investments and bank deposits were made by her husband, who was independently assessed. The tribunal highlighted that the AO should have provided clear reasons for proceeding with the case.
The two member bench comprising Anubhav Sharma(Judicial Member) and Brajesh Kumar Singh(Accountant Member) decided that the assumption of jurisdiction under Section 147 of the Act was not valid. Therefore, the appeal was allowed, and the assessment was declared non-est and void ab initio.
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