Validity of Reopening u/s 148 for Verification Purposes: ITAT quashes Reopening as Legally Invalid [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) quashed the reopening of the case under section 148 of Income Tax Act,1961 ruling that the reassessment initiated for verification purposes was legally invalid.

JHM Developers Pvt. Ltd,appellant-assessee, challenged the order dated 15.02.2024 passed by National Faceless Appeal Centre (NFAC), for assessment year 2011-12 in proceedings under section 250 of the Act.

A Single Member Bench comprising Satbeer Singh Godara(Judicial Member) after hearing both parties and reviewing the case, found that the Assessing Officer(AO) had reopened the case under sections 148/147 only to verify transactions of Rs. 57.70 lakhs, which the Revenue did not contest.

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Section 147 of the Act, deals with the initiation of reassessment when the Income Tax Officer (ITO) has a reason to believe that any income has escaped assessment. The ITO can reopen the assessment if they find that income was not assessed or was under-assessed in the original assessment.

 This could happen if the taxpayer failed to file a return, or if there was an error or omission in the earlier assessment. Reassessment under Section 147 can generally be initiated within four years from the end of the relevant assessment year. However, in certain cases, such as when the income has escaped assessment due to the taxpayer's failure to disclose material facts, reassessment can be done within six years.

Section 148 of the Act relates to the process of issuing a notice for reassessment. Once the ITO has decided to reopen an assessment under Section 147, they must issue a notice to the taxpayer, informing them of their intention to reassess the income.

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The notice must specify the reasons for reopening the assessment and must be issued after obtaining approval from a higher authority, such as the Chief Commissioner or Director-General of Income Tax. The notice has to be issued within a specific time frame, typically within four years from the end of the relevant assessment year, unless there are exceptional circumstances that warrant a longer period.

The tribunal ruled that reopening for verification was not legally valid and quashed it referring to PCIT v. Manzil Dinesh Kumar Shah (2018) and PCIT v. Maheshwari Devi (2023).

In short,the appeal filed by the assessee was allowed.

To Read the full text of the Order CLICK HERE

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