Ground of Appeal and Arguments in writing before ITAT, when the Assessing Officer has not complied with statutory provisions of section 147 to 151 of the Income Tax Act 1961
On the facts and in the circumstances of the case and in law the Ld. Commissioner of Income tax (Appeals), XXXXXXX is not justified who erred in dismissing the appeal of the assessee without taking into consideration that the reasons recorded u/s 148(2) of the Income Tax Act, 1961 by the Ld. Assessing Officer, Ward No. XXX, XXXXXXXX are vague and farfetched. Reasons Recorded U/s 148(2) were never supplied to the assessee even assessee made a request in writing to the Assessing officer, Ward No. XXX, XXXXXXXXX. The entire assessment is bad in law and spirits as the reopening is bad enough.
This ground of appeal was with CIT (A), XXXXXXXX. (Ground No. 3)
Copy of reasons recorded were not supplied to the assesse even on a request made by the assessee Dt. 7.10.2017
Copy of the reasons were not supplied to the assesse and it has been recorded u/s 148(2) without application of mind.
The assesse has applied for the copy of reasons recorded for reopening of the assessment dt 7.10.2017 but ITO has not provided the copy of the reasons before finalization of the assessment.
ITO has not given copy of reasons recorded but he has intimated to the assessee during the course of assessment proceedings. The intimation is no substitute for reasons recorded. In the show cause notice dt. 09.10.2017
issued u/s 142(1) of the Act, he has mentioned the text of reasons for reopening of the case but that show cause notice also contains wrong information.
The Ld. CIT (A), XXXXXXXX has given in his order that the reasons recorded by the AO were intimated to the assessee during the course of assessment proceedings and there is no requirement to supply copy of reasons recorded to the assessee separately.
The assessee has written to the AO, Ward No.XXXX for supply of copy of reasons but he has not bothered to supply the same till the end of the assessment. Attested copy of the reasons were supplied to the assessee when he applied for the copy of reasons with certified copy.
The recording of reasons for reopening of assessment and furnishing of the same has to be strictly complied with as it is a jurisdictional issue. On non-furnishing of the reasons the assessee has relied on the following judgement.
CIT Vs. Trend Electronics (2015) 379 ITR 456 (Bom.)
At Page No. 36 of the CIT(A) order at last para the CIT (A) has written
“Further the AO has confronted the appellant during the assessment proceedings the entire information/ material which was the basis for recording reasons u/s 147 of the Act.”
Reasons are not recorded u/s 147 but it is recorded u/s 148(2) of the Act. The Ld CIT (A) has erred in quoting wrong section here
Further the order says: –
“Copy of reasons has not been provided to the appellant during the assessment proceedings, the same would not invalidate the entire proceedings.”
No judgement of any court has ever mentioned that it is the whim and whip of the AO to supply or not to supply copy of reasons to the assessee. The copy of reasons has to be supplied to the assessee. To provide copy of reasons recorded and copy of approval u/s 151 is mandatory requirement and without this the assessment framed is requested to be made null and void.
The Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd. v. Income-tax Officer, 259 ITR 19(SC) has held as under:
“When a notice under section 148 of the Income-tax Act, 1961, is issued, the proper course of action for the noticee is to file the return and, if he so desires, to seek reasons for issuing the notice. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order.”
One Show Cause Notice was issued to the assessee dt 9.10.2017 which states that no return of Income has been filed by the assessee in response to the notice u/s 148 of the Act. But there is a letter from the assessee submitted during the course of assessment proceedings which clearly states that the return filed originally may be treated as filed in response to the notice u/s 148 of the Act.
“Copy of letter is enclosed which is placed at
That means the Show Cause Notice sent to the assessee is unmindful exercise of the AO as the assessee has already filed the return of Income and the AO has acknowledged the same in his Assessment order
At the stage of recording the reasons for reopening the assessment, the formation of prima facie belief that an income has escaped assessment is necessary. However, it is also necessary that there must be something which indicates, even if not established, the escapement of income from assessment. The reassessment proceedings could not be resorted to unless there was reason to believe, rather than suspect that income has escaped assessment. Thus reassessment proceedings is to be set aside.
Copy of reasons were recorded by AO without application of mind, only on the basis of AIR information.
There was no material with AO at the time of “Reasons to Believe”. The ITO has formed his belief on the basis of AIR information which was never confronted to the assessee. He was not having any material with him at the time of reasons recorded and formation of his belief for escapement. The following judgements supports the view of the assessee.
S. Narayannappa v. CIT (1967) 63 ITR 219 (SC)
The expression ‘reason to believe’ in section 147 does not mean purely subjective satisfaction on the part of the assessing officer. The belief must be held in good faith; it cannot be merely a pretense. It is open to the court to examine whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent the action of the Assessing officer in starting proceedings under section 147 is open to challenge in a court of law.
The reasons were recorded by ITO in a mechanical manner. The PCIT, XXXXXX granted approval u/s 151 in mechanical manner. Copy of approval was never supplied by the ITO to the assessee. The action of the AO which is contrary to law, therefore, the entire assessment framed is prayed to be made null and void.
The following judgement supports the view of the assessee regarding approval u/s 151 of the Act by the PCIT, XXXX
Hon’ble Delhi High Court in the case of Pr. CIT Vs. NC cables Ltd in ITA No. 335/2015
The nature of business shown in the return is income from sale and purchase of the properties and other business income.
Other business income is net profit from M/S ABC Industries and sale purchase of fruits, vegetables and milk. Rs. 2,29,787.00 is the net income. Turnover was not declared in the ITR but only net profit was shown. The formation of reason to believe is false, having no material tangible or intangible. The belief for formation of reasons to believe that Rs. 16,40,000.00 is income of the assessee is false. Unmindful act of the AO without making independent enquiries. Enquiry letter has been sent at the wrong address of the assessee. It has been issued to two persons simultaneously Ram Pal and Sunita Rani. Copy of reasons recorded has been issued to two persons simultaneously even at the wrong address of the assessee. Regarding inquiry letter it is a general inquiry letter not issued u/s 133(6) of the act. It carries no legal sanctity. This enquiry notice has not been received by the assessee otherwise he would have replied as he had already filed the return for the A.Yr. 2012-13.
The reopening is bad enough. The reopening has been done on the basis of cash deposited with the saving bank of the assessee. The only basis for reopening is cash deposited with the saving bank account of the assessee for a sum of Rs. 16,40,000.00 and the addition of Rs. 11,90,000.00 has been made that the assessee has no withdrawals during the period from 01.04.2009 to 19.06.2009. The cash deposited with the bank till 19.06.2009 and addition made to the total income because the assessee has not made withdrawals in this period. This can never be a base for undisclosed income of the assessee. The formation of reasons recorded is without any tangible material. Only on the basis of AIR information, the formation of reasons to believe is not in accordance with law.
The reasons recorded are without application of mind, without making independent enquiries, without gathering any material, without having bank statement with him, he relied on the AIR information.
The assessee relies on the following judgement:
Udesh Sharma Vs ITO (ITAT) Delhi 29.03.2022
Reopening merely based on AIR information is not valid. Copy enclosed
The reasons recorded on the basis of the following formation of belief as stated by the AO
“The nature of income declared does not commensurate with the cash deposit in saving bank account.” Hence there is every reason to believe that assessee has made cash deposits in his bank account from undisclosed sources.”
From the above it is found that the AO has reopened the assessment on the fallacious assumptions. As there is no link between nature of business with the deposits. There can be a link between the amount of cash deposit and income shown in the ITR but there cannot be a link between nature of business and cash deposited with the bank. The reopening is quite bad. No bank account number has been mentioned in the recorded reasons. The information with the department has never been confronted to the assessee. The reasons to believe are baseless and have no legs. The entire cash deposit with the bank cannot be income from undisclosed sources. The reasons recorded are based on fallacious assumptions. He has made no enquiries before recording reasons.
The assessee relies on the following judgement:
ITAT, Delhi Karan Khurana Vs. ITO Ward No. 48(2), New Delhi Dt. 17.03.2021
Proceedings are initiated u/s 148 of the Act after obtaining prior approval from the Ld. PCIT, XXXXX. Without obtaining approval initiation of the proceedings cannot be made by issue of notice u/s 148 of the Act as the AO has not mentioned in the copy of reasons recorded that notice u/s 148 of the Act is issued to the assessee after obtaining prior approval from the PCIT, XXXXX u/s 151 of the Act. The reasons recorded are baseless and has no legal sanctity. It makes clear that there is a total non-application of mind on the part of the AO while recording the reasons for reopening of the assessment. The reasons failed to demonstrate the live link between the alleged tangible material and the formation of belief that income chargeable to tax has escaped assessment. Hence the assessment is requested to be made null and void.
On the basis of above submissions, the Hon’ble ITAT is requested to make the entire assessment null and void in the absence of valid reasons recorded.
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