The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) recently observed that the reasons, as recorded forreopening the reassessment, are to be examined on a standalone basis to determine the validity of proceedingsunder Section 147 of the Income Tax Act.
The appellant/assessee, Jowheri Jalaluddin Mullick, is an individual who is a non-resident and for the year under consideration, the assessee filed the return of income, declaring a total income. The information was received from DIT (I&CI) that the assessee has sold a property during the year under consideration; proceedings under Section 147 were initiated, and a notice under Section 148 of the Income Tax Act.
The Assessing Officer rejected the objections filed by the assessee and directed the assessee to comply with the notice issued under Section 142(1) of the Income Tax Act and furnish the details as required.
Accordingly, by virtue of a draft assessment order passed under Section 144C of the Income Tax Act, the Assessing Officer computed the additional long-term capital gains and added them to the total income of the assessee.
The Counsel for the assessee contended that reopening the assessment is illegal as no addition has been made on the basis of the reasons recorded by the Assessing Officer that the assessee has sold the property for sale consideration and capital gains on the same have escaped assessment.
The Counsel further went on to argue that the Assessing Officer instead reworked the capital gains already declared by the assessee and added the additional long-term capital gains. The reasons for reopening are very different from the actual assessment made by the Assessing Officer.
A Bench of Sandeep Singh Karhail (Judicial Member) and M. Balaganesh (Accountant Member) relied on the Bombay High Court’s decision in the case of Hindustan Lever Ltd. vs. R. B. Wadkar, which held that it is for the AO to record his opinion in black and white. The reasons recorded for the assessment should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose in his mind. Reasons are the manifestation of the mind of the assessing officer. The reasons recorded should be self- explanatory and should not keep the assessee guessing as to the reasons.”
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