Reassessment without 'Reasons to Believe': ITAT Restores Matter to CIT(A) [Read Order]

The Raipur Bench of Income Tax Appellate Tribunal(ITAT)  restored the matter to the Commissioner of Income Tax(Appeals)[CIT(A)] after finding that the reassessment was initiated without providing the "reasons to believe."

Shikhar Chand Jain,appellant-assessee,filed a return of income for A.Y. 2011-12 on March 31, 2013, declaring Rs. 1,57,280/-. The Assessing Officer(AO) later received information that a property was sold for Rs. 47.57 lakhs on April 3, 2010, but the capital gain was not reported. Proceedings under Section 147 were initiated, and a notice under Section 148 was issued on February 27, 2018. In response, the assessee filed a return on November 29, 2018, declaring the same income as before.

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During assessment, the AO found that the assessee claimed Rs. 9.75 lakhs as a cost of improvement, with Rs. 6.25 lakhs for 1990-91 and Rs. 3.50 lakhs for 1991-92. Due to a lack of documentary evidence, the A.O. disallowed the claim and recalculated the Long term Capital Gain(LTCG) at Rs. 36,90,097/-. As a result, the total income was assessed at Rs. 38,47,380/- under Section 143(3) read with Section 147 of the Act.

The assessee appealed before the CIT(A), but the appeal was dismissed due to non-compliance despite multiple opportunities. The CIT(A) upheld the AO's addition of Rs. 36,90,097/- towards LTCG.

The assessee then filed a rectification application under Section 154 on September 21, 2024, claiming the CIT(A) had not addressed key issues. However, the CIT(A) rejected the request, stating there was no apparent mistake in the order and that the assessee had failed to provide evidence during the proceedings.

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Aggrieved, the assessee appealed the CIT(A)'s order before the tribunal.

The assessee's counsel argued that the CIT(A) dismissed the appeal without addressing key issues and wrongly rejected the rectification request. The counsel requested a fresh hearing with a fair opportunity for the assessee.

The departmental representative countered that the assessee was given multiple chances but did not respond, so the CIT(A) rightly decided based on available records and upheld the A.O’s addition.

A single member bench comprising Ravish Sood(Judicial Member) found that the CIT(Appeals) dismissed the appeal without addressing key issues raised against the assessment order. The assessee had challenged the AO’s jurisdiction for reopening the case without providing the “reasons to believe.” The ITAT held that the CIT(A) should have examined this issue by reviewing the assessment records.

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It also noted that the assessee’s rectification application, citing a Bombay High Court ruling, was wrongly dismissed, allowing the error to persist. Finding this approach arbitrary, the tribunal restored the matter to the CIT(A) for reconsideration, directing a fresh hearing and allowing the assessee to submit additional evidence if needed.

In short, the appeal filed by the assessee was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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