Criteria for satisfying the condition precedent i.e. “reason to believe, escapement of income’' while reopening an assessment

IN THE INCOME TAX APPELLATE TRIBUNAL “C(SMC)” BENCH: KOLKATA
 [Before Shri A. T. Varkey, JM]

I.T.A. No. 2142/Kol/2019
Assessment Year: 2013-14

Jai Prakash Gupta
(PAN: AGJPG 5316 J)
Appellant 

Vs. 

ITO,Ward-37(1), Kolkata
Respondent

Date of Hearing (Virtual) 29.04.2021
Date of Pronouncement 18.06.2021

For the Appellant Shri K. M. Roy, A.R
For the Respondent Shri Jayanta Khanra, JCIT, Sr. DR

ORDER

 This is an appeal preferred by the assessee against the order of Ld. CIT(A)-11,Kolkata dated 26.07.2019 for Assessment year 2013-14.

2. At the outset, the Ld. A.R of the assessee Shri K. M. Roy assailed the jurisdiction of the AO to reopen the assessment u/s 147 of the Income Tax Act, 1961 (hereinafter referred to as the Act) without satisfying the condition precedent i.e. “reason to believe, escapement of income’’, in the reasons recorded by him before re-opening the assessment of AY 2013-14. Therefore according to Ld. A.R, the reopening itself is bad in law and without jurisdiction, so consequent framing of assessment order is null in the eyes of law.

3. I note that since the assessee has raised a legal issue challenging the jurisdiction of AO to reopen, which issue if found to be correct, then will go to the root of the reassessment order dated 21.12.2017 itself and therefore need to be adjudicated at the first instance; and since it is a legal issue it is noted that it can be raised for the first time even before this Tribunal as held by the Hon’ble Supreme Court in National Thermal Power Co. Ltd. vs. CIT in [1998] 229 ITR 383 (SC). 

4. Brief facts of the case is that the assessee had filed the return of income showing Rs. 2,84,100/-. The return of income (ROI) was processed u/s 143(1) of the Act. Thereafter in March 2017, the AO issued notice u/s 148 of the Act conveying his desire to reopen the assessment u/s 147 of the Act. Pursuant to the assessee seeking the reasons for reopen, the assessee was given a copy of reason recorded for reopening and thereafter the AO passed the reassessment order u/s 147/143(3) of the Act on 21.12.2017 wherein he treated the long term capital gain (hereinafter referred to as LTCG) earned by the assessee on sale of shares of M/s Essar India Ltd. as bogus and added back the LTCG earned by assessee of Rs. 9,70,583/-.

5. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the order.

6. Aggrieved the assessee is before us.

7. The Ld. A.R. assailing the action of AO to reopen challenges the very initiation to reopen u/s 147 of the Act. According to him, the AO has merely reproduced the information which he received from the investigation wing in the reasons recorded u/s 147 of the Act. And that he has neither given the details of the information on the basis of which he proposed to reopen nor has he applied his mind and merely concluded that the transactions as bogus. Thus according to him, these reasons are therefore not in fact reasons but only his conclusion and that too without any basis. Further according to him, the AO has not brought any material on record on the basis of which any nexus could have been established between the material and the escapement of income. Thus according to him, the reasons recorded by AO, fail to demonstrate the link between the alleged tangible material and formation of the reason to believe that income has escaped assessment. So, he submitted that the very basis/foundation which enables an officer to assume jurisdiction u/s 147 is absent; so according to him, the AO has no jurisdiction to reopen the assessment. Further according to Ld. A.R. from a perusal of assessment order it can be seen that the AO has added a sum of Rs. 9,73,583/-. 

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