Mohd Shafi Isamail Merchant Vs ITO (ITAT Mumbai)
Reassessment Quashed for Non-Recording of Reasons u/s 148(2): ITAT Mumbai Draws Adverse Inference Against Revenue
The Mumbai ITAT (SMC Bench) allowed the appeal of the assessee for AY 2006-07 and quashed the reassessment proceedings initiated under sections 147/148, holding that the mandatory requirement of recording reasons for reopening was not complied with.
The reassessment was triggered solely on the basis of AIR information alleging investment of ₹43.62 lakh in immovable property. The assessment was completed ex parte under section 144 r.w.s. 147, making additions towards purchase consideration, stamp duty and registration charges. Before the CIT(A), the assessee specifically challenged the jurisdiction of reopening on the ground that notices were not served, reasons were never recorded or furnished, and the case was one of source verification rather than income escapement. However, the CIT(A) merely set aside the matter to the AO for fresh assessment without adjudicating the jurisdictional challenge.
During Tribunal proceedings, despite repeated and specific directions, the Revenue failed to place on record the reasons recorded for reopening. The Department candidly admitted that the reasons were not available. Drawing an adverse inference, the ITAT held that in the absence of recorded reasons forming part of the record, it must be presumed that no reasons were recorded as mandated under section 148(2). Relying on earlier Tribunal decisions, the reassessment was held to be void ab initio for non-compliance with sections 147 and 148.
Accordingly, the reassessment proceedings and the consequent assessment order dated 06.03.2014 were quashed, and the entire demand was deleted. The appeal of the assessee was allowed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
1. The Assessee has preferred the present appeal against the Order, dated 24/12/2024, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’], under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], whereby the Ld. CIT(A) had set-aside the Assessment Order, dated 06/03/2014, passed under Section 144 read with Section 147 of the Act, for the Assessment Year 2006-2007 in terms of First Proviso to Section 251 the Act.
