Reasons recorded in 142(1) Notice were not existing at the Time of Issue of Re-Assessment Notice: Calcutta HC quashes Assessment [Read Order]

The Calcutta High Court, while quashing an assessment order, held that the reasons mentioned in the notice under Section 142(1) read with Section 147 of the Income Tax Act, 1961 were not existing at the time of issue of re-assessment notice.

The department issued a re-assessment notice to the assessee. On receipt of the same, the assessee requested the assessing officer concerned to provide him a copy of the recorded reasons for issuing notice under Section 148 of the Act and initiating the impugned reassessment proceeding under Section 147 of the Act. Later, instead of furnishing the recorded reasons to the petitioner, the assessing officer straight away issued a notice under Section 142(1) read with Section 147 of the Act on 24th June, 2021

Justice Md. Nizamuddin held that for the first time assessing officer has recorded reasons for reopening of assessment while the law requires that at the time of issuing notice under Section 148 of the Act and initiation of proceeding under Section 147 of the Act, assessing officer concerned must have recorded reasons to believe that there was escapement of any income in the relevant assessment year and post facto recording of reasons for reopening of assessment cannot cure this inherent defect and will not regularise or legitimatize the issuance of impugned notice or initiation of the impugned reassessment proceeding.

The Court found that though the Revenue was asked to produce the record to establish that the recorded reasons were existing at the time of issuance of impugned notice under Section 148 and initiation of impugned assessment proceeding under Section 147 of the Act, they  failed to produce any record to show that at the time of issuance of impugned notice under Section 148 and initiation of reopening of assessment proceeding under Section 147 of the Act it was existing and as a consequence this Court has to presume that at the time of issuance of impugned notice under Section 148 of the Act and initiation of impugned reassessment proceeding under Section 147 of the Act, there was no existence of any recorded reasons which is a condition precedent for initiation of impugned proceeding for reopening of assessment under Section 147 of the Income Tax Act, 1961.

“As such the impugned notice is not sustainable in the eye of law and has to be quashed and all subsequent proceedings on the basis of the impugned notice also cannot survive,” the Court said.

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