ITAT Quashes Reassessment: AO Reopened Case on Wrong Assumption That Assessee Was a Non-Filer

Ravindra Kumar Gupta Vs ITO (ITAT Hyderabad)

ITAT Quashes Reassessment: AO Reopened Case on Wrong Assumption That Assessee Was a Non-Filer

The Hyderabad ITAT quashed the entire reassessment proceedings after finding that the Assessing Officer had reopened the assessment on a factually incorrect assumption that the assessee had not filed a return of income. The Tribunal noted that while recording reasons for reopening under section 147, the Assessing Officer specifically stated that the assessee was a “non-filer”. However, the records clearly showed that the assessee had already filed his return of income for AY 2014-15 on 28.07.2014 under section 139.

The Tribunal held that once the very foundation of the “reason to believe” was based on an incorrect fact, the reassessment proceedings suffered from non-application of mind. Jurisdiction under section 147 can be assumed only after proper application of mind to the material available on record. Where the reasons recorded are founded on a demonstrably erroneous factual premise, the notice issued under section 148 cannot survive in law.

Relying on the decision of the Gujarat High Court in Mumtaz Haji Mohamad Memon v. ITO (408 ITR 268), the Tribunal observed that reassessment proceedings initiated on incorrect factual assumptions are invalid. Since the Assessing Officer proceeded on the mistaken belief that the assessee was a non-filer despite the return already being on record, the notice issued under section 148 was held to be invalid and the consequential reassessment order was quashed.

A reassessment cannot stand where the reasons recorded themselves are based on incorrect facts. If the Assessing Officer proceeds on a mistaken assumption, such as treating a return-filer as a non-filer, the reopening is liable to be struck down for non-application of mind.

FULL TEXT OF THE ORDER OF ITAT HYDERBAD

This appeal is filed by Shri Ravindra Kumar Gupta (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”) dated 07.07.2025 for the A.Y. 2014-15.

2. The assessee has raised the following grounds of appeal:

3. The brief facts of the case are that the case of the assessee was reopened under section 147 of the Income Tax Act, 1961 (“the Act”) and accordingly notice under section 148 of the Act was issued by the Learned Assessing Officer (“Ld. AO”) on 30.03.2021. In response to the notice issued under section 148 of the Act, the assessee filed return of income on 23.04.2021 declaring total income of Rs.27,86,730/-. Thereafter, the Ld. AO conducted reassessment proceedings and made additions of Rs.3,86,23,860/-, Rs.61,30,514/- and Rs.11,24,800/- under section 69A of the Act and a further addition of Rs.1,45,106/- under section 69C of the Act. Accordingly, the Ld. AO completed the assessment under section 147 read with section 144B of the Act vide order dated 27.03.2022 assessing the total income at Rs.4,88,10,010/-.

4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). After considering the submissions of the assessee, the Ld. CIT(A) dismissed the appeal of the assessee.

5. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal. At the outset, the Ld. AR submitted that the assessee has raised a legal ground being Ground No.2 challenging the validity of the notice issued under section 148 of the Act. Inviting our attention to page no.1 of the assessment order, the Ld. AR submitted that while recording reasons to believe, the Ld. AO has specifically recorded that the assessee was a non-filer. The Ld. AR further invited our attention to page no.100 of the paper book, which contains the acknowledgement of return of income filed by the assessee for Assessment Year 2014-15 under section 139 of the Act. It was submitted that the assessee had already filed the return of income for Assessment Year 2014-15 on 28.07.2014. The Ld. AR contended that the recording of the fact by the Ld. AO that the assessee was a non-filer is factually incorrect. According to him, the very foundation on which the reassessment proceedings were initiated is erroneous and demonstrates complete non-application of mind on the part of the Ld. AO while assuming jurisdiction under section 147 of the Act. The Ld. AR submitted that once the reasons recorded are based on incorrect facts, the notice issued under section 148 of the Act becomes invalid and the reassessment proceedings initiated pursuant thereto are liable to be quashed. In support of his contentions, the Ld. AR relied upon the decision of the Coordinate Bench of this Tribunal in the case of Tahera Abida Ghori Vs. DCIT in ITA No.777/Hyd/2020 for Assessment Year 2008-09 dated 29.12.2023 and the judgment of the Hon’ble Gujarat High Court in the case of Mumtaz Haji Mohamad Memon Vs. ITO reported in 408 ITR 268. Accordingly, the Ld. AR prayed that the notice issued under section 148 of the Act be held to be invalid and the consequent reassessment order be quashed.

6. Per contra, the Learned Departmental Representative (“Ld. DR”) relied upon the orders of the lower authorities. It was submitted that the reassessment proceedings were validly initiated and the Ld. AO had rightly completed the reassessment after considering the material available on record. Accordingly, the Ld. DR supported the orders of the authorities below.

7. We have heard the rival submissions and perused the material available on record including the case laws relied upon. In Ground No.2, the assessee has challenged the validity of the reassessment proceedings by contending that the reasons recorded by the Ld. AO are based on an incorrect factual premise and consequently the notice issued under section 148 of the Act is invalid. In this regard, we have gone through para no.1 of the assessment order, which is to the following effect:

“Notice u/s 148 of the Act was issued on 30.03.2021 after recording the following reasons:-

“As per the information received (High Risk CRIU/VRU information) insight instruction No.28 in F. No.DGIT(s)– ADG(s)-2/CRIU VRU High Risk cases/2020-21, dt: 23.03.2021. On verification, it is noticed that the assessee is a non-filer and Information regarding Naresh Jain and Others the F.Y.2013-14 relevant to A.Y.2014-15 an amounting to Rs. 61,30,514 Hence, I have reason to believe that income chargeable to tax the extent of Rs 61,30,514/- has escaped assessment within the meaning of section 147 of the I.T. Act, 1961.”

8. In para number 1 of the assessment order, the Ld. A.O has reproduced the reason recorded by him for the issue of notice under section 148 of the Act. On perusal of the same, we find that the Ld. AO has recorded that the assessee was a non-filer and proceeded to initiate reassessment proceedings on that basis. We have also gone through the acknowledgement of return of income filed by the assessee for Assessment Year 2014-15 under section 139 of the Act placed at page no.100 of the paper book, which is to the following effect:

9. On perusal of the above, it is evident that the assessee had already filed his return of income for Assessment Year 2014^–15 on 28.07.2014. Thus, the factual assertion recorded by the Ld. AO in the reasons to believe that the assessee was a non-filer is demonstrably incorrect. Once it is established from the record itself that the assessee had filed the return of income for the relevant assessment year, the very basis on which the jurisdiction under section 147 of the Act was assumed stands vitiated. In our considered opinion, recording of an incorrect fact while forming the belief for reopening the assessment clearly establishes non-application of mind on the part of the Ld. AO. Jurisdiction under section 147 of the Act can be assumed only after due application of mind to the material available on record. Where the reasons recorded are founded upon a factually incorrect assumption, the jurisdiction so assumed cannot be sustained. We have also gone through para nos. 4 to 12 of the judgment of the Hon’ble Gujarat High Court in the case of Mumtaz Haji Mohamad Memon Vs. ITO (Supra), which is to the following effect:

10. On perusal of the above, we find that under similar facts, where the Assessing Officer proceeded on an erroneous factual premise while recording reasons for reopening, the Hon’ble Gujarat High Court held that the reopening proceedings suffered from non-application of mind and accordingly quashed the notice issued under section 148 of the Act as well as the consequential reassessment proceedings. The ratio laid down by the Hon’ble Gujarat High Court squarely applies to the facts of the present case. In the instant case also, the Ld. AO proceeded on the assumption that the assessee was a non-filer, whereas the material placed before us clearly establishes that the assessee had already filed his return of income under section 139 of the Act on 28.07.2014. Therefore, the reasons recorded by the Ld. AO are based on an incorrect factual premise and consequently suffer from non-application of mind. Therefore, respectfully following the judgment of the Hon’ble Gujarat High Court in the case of Mumtaz Haji Mohamad Memon vs. ITO (Supra), we hold that the notice issued under section 148 of the Act in the present case is invalid in law. Consequently, the reassessment order passed by the Ld. AO under section 147 read with section 144B of the Act dated 27.03.2022, being founded upon an invalid notice issued under section 148 of the Act, is liable to be quashed and is accordingly quashed.

11. Since the assessee succeeds on the legal issue challenging the validity of the reassessment proceedings, the remaining grounds raised by the assessee become academic and therefore do not require separate adjudication.

12. In the result, the appeal of the assessee is allowed.

Order pronounced in the Open Court on 12th June, 2026.