Reassessment not sustainable when Reasons for Initiation of Proceedings Ceased to Survive: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Jaipur Bench ruled that the reassessment under section 147 of the Income Tax Act was not sustainable when reasons for initiation of proceedings ceased to survive.

The assessee, Vijay Kumar Agarwal submitted that the information received by the AO from another AO, however, the said information was neither verified nor subjected to any independent examination by the AO of the assessee and while recording reasons, there was no transaction specific valid material available with the A.O. to form his belief with regard to escapement of income by the assessee.

The C.I.T. (A) confirmed the addition of Rs.51,28,143/- made on account of alleged unexplained expenditure in executing contract, while assessee has satisfactorily explained nature of work and payments.

The coram of Vikram Singh Yadav and Sandeep Gosain said that noted that the sequence of events leading to the notice u/s 147 of the Act clearly reflects a borrowed satisfaction by the A.O. instead of forming their own independent satisfaction by the AO while recording the reasons, therefore, the reopening u/s 147 of the Act was solely based on the information received by the AO.

“The reasons to believe cannot be reasons to suspect and there must be a direct nexus between the material coming to the notice of the A.O. and the formation of belief therefrom for escapement of income. On the scrutiny of the recorded reasons,” the ITAT said.

The ITAT in the light of various judicial precedents ruled that the Assessing Officer had the jurisdiction to reassess issues other than the issues in respect of which proceedings are initiated but he was not so justified when the reasons for the initiation of those proceedings ceased to survive.

In the light of the above facts, the Tribunal held that reopening proceedings initiated by the AO were uncalled for and without jurisdiction, therefore, the tribunal quashed the same.

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