Reopening Quashed: Incorrect Reason of “Non-Filing” Renders Section 148 Notice Void
Issue
Whether the reopening of an assessment under Section 147 is valid when the recorded reason for forming the belief of income escapement—specifically that the assessee was a “non-filer” of an Income Tax Return (ITR)—is factually incorrect, as the assessee had indeed filed the return for the relevant year.
Facts
Assessment Year: 2012-13.
Trigger for Reopening: The Assessing Officer (AO) received information via the Non-PAN AIR (Annual Information Return) regarding cash deposits of Rs. 51.07 lakhs in the assessee’s bank account.
AO’s Recorded Reason: The AO recorded reasons stating that, according to available information, the assessee was “not assessed to tax” and had “not filed ITR” for the relevant assessment year. Based on this premise of non-filing, the AO formed the belief that income had escaped assessment and issued a notice under Section 148.
Assessee’s Defense: The assessee demonstrated that they had, in fact, filed the return of income on 31.03.2013. A copy of the ITR acknowledgement was placed on record before the lower authorities and the Tribunal.
Procedural Context: The assessee raised an additional legal ground (Ground 8) challenging the validity of the reopening, citing incorrect facts and mechanical approval. The Tribunal admitted this legal ground.
Decision
The ITAT Delhi Bench allowed the additional legal ground and quashed the reassessment proceedings.
Factual Error: The Tribunal noted the glaring contradiction: the AO reopened the case on the specific premise that the assessee was a “non-filer,” whereas the record indisputably showed that a return had been filed.
Reliance on Precedent: The Tribunal relied on the binding judgment of the Delhi High Court in Deepak Wadhwa vs. ACIT, which dealt with identical facts. In that case, the High Court held that if the “reasons to believe” are based on the factually incorrect premise of non-filing, the notice under Section 148 is unsustainable.
Outcome: Since the foundation of the reopening (non-filing) was factually incorrect, the notice under Section 148 and the consequent assessment order were held to be invalid.
Key Takeaways
“Reasons to Believe” Must be Factually Correct: The validity of a reassessment hinges on the correctness of the reasons recorded. If the primary reason (e.g., non-filing of return) is proven false by record, the “nexus” between the material and the belief breaks down, rendering the reopening void.
Verification is Mandatory: Before issuing a notice under Section 148, the AO is expected to verify basic facts like the filing status of the assessee. Failing to do so indicates a lack of application of mind.
Legal Grounds Can be Raised Anytime: A purely legal objection that goes to the root of jurisdiction (validity of notice) can be raised for the first time before the Tribunal, even if not argued before lower authorities (NTPC Ltd. vs. CIT).