In a significant decision, Ahmedabad Tribunal in Arpanbhai Virambhai Desai vs ITO delivered decision in four appeals emanated from common facts- information received from the Anti-Corruption Bureau (ACB) regarding alleged disproportionate assets (DA) of Shri Virambhai Lilabhai Desai, Deputy Mamlatdar, E-Dhara Centre, Kalol. Assessee, being his son, was also named in the FIR u/s 12, 13(1)(b) & 13(2) of the Prevention of Corruption Act, 2018. On this basis, AO reopened Assessee’s cases u/s 147 for all years, alleging undisclosed income from disproportionate assets.
For AYs 2014-15 & 2015-16, orders passed u/s 147 were subsequently revised by PCIT u/s 263. For AYs 2017-18 & 2018-19, reassessments were framed u/s 147 r.w.s. 144C pursuant to DRP directions. Assessee contended that all proceedings were void ab initio, as the reopening itself lacked valid jurisdiction.
Tribunal found that the reasons recorded by AO were vague & based entirely on borrowed belief from the ACB report. AO merely reproduced ACB figures of DA – ₹3.02 crore for AY 2014-15 & ₹5.38 lakh for AY 2017-18 – without identifying any specific property, asset, or transaction, nor showing any application of independent mind. The so-called belief of escapement was thus held to be not AO’s own but a mechanical adoption of ACB’s allegation.
Relying on the Gujarat High Court ruling in Kantibhai Dharamsinhbhai Narola v. ACIT (SCA No.19549/2018, dt. 06.01.2021), Tribunal reiterated that “the belief must be the AO’s own, not borrowed; reasons must speak for themselves & demonstrate a live link between material & belief.” Since AO failed to identify what constituted “income that escaped assessment”, the entire reopening was held to be without valid jurisdiction.
Consequently, reassessments for AYs 2014-15 & 2015-16 were quashed as invalid. Tribunal further held that once the foundation (i.e., assessment u/s 147) is void, PCIT cannot exercise revisionary jurisdiction u/s 263 over a non-existent order. Reliance was placed on Westlife Development Ltd v. Pr.CIT (Mum ITAT), Pioneer Distilleries Ltd v. Pr.CIT (Pune ITAT) & Krishna Kumar Saraf v. CIT (Del ITAT), all holding that “a non-est or void order cannot be revised u/s 263.”
For later years (AYs 2017-18 & 2018-19), Tribunal found the same defect persisted. Though AO purportedly acted u/s 148A(b) after Ashish Agarwal ruling, the “information” still consisted only of the ACB’s generalized computation of DA, without any specific item of undisclosed income. Tribunal noted that AO’s order u/s 148A(d) merely repeated ACB’s calculation without any independent analysis or identification of the alleged unexplained asset.
Thus, applying the same reasoning as earlier years, Tribunal held that jurisdiction assumed u/s 147 was invalid for AYs 2017-18 & 2018-19 as well. All four assessments & both 263 orders were quashed.
Held:
– Reopening based on borrowed satisfaction from ACB report invalid.
– AO failed to form independent “reason to believe.”
– Assessment orders u/s 147 quashed for lack of jurisdiction.
– Revisionary orders u/s 263 also void, as PCIT cannot revise a non-est order.
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