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Lalchand Mehrumal Jagwani, Pune vs. Income-Tax Officer - (Income Tax Appellate Tribunal) (19 Dec 2022)

No jurisdiction can be assumed for framing assessment under Section 147 of the IT Act in absence of reasons to believe about the escapement of income


Direct Taxation

The assessee is a real estate agent, who furnished his original return. Thereafter, the Assessing Officer (AO) received information indicating that, the assessee held an account with Lalchand Mehrumal Jagwani HSBC, Bund Garden Road, Pune branch jointly with his wife, in which deposits of Rs.33.31 lacs and withdrawals of Rs.53.14 lacs were made. On the basis of above information, the AO recorded reasons and issued notice under Section 148 of the Income-tax Act, 1961 (IT Act) requiring the assessee to furnish return. The assessee remained unsuccessful before the learned CIT(A) - both on legal issue as well as merits. Aggrieved thereby, an appeal has been preferred before the Tribunal.

The assessee tendered an explanation about the source of cash deposits in the bank and also withdrawals made therefrom for purchasing a house at Kalyani Nagar for Rs.86 lacs. The AO initiated re- assessment proceedings just to verify the transactions of deposits and withdrawals in/from the bank account.

Section 147 of the IT Act, dealing with the reassessment, opens with the words "If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of Sections 148 to 153, assess or reassess such income ....". It is ostensible that the action under Section 147 of IT Act can be taken when the AO has formed reasons to believe that some income chargeable to tax has escaped assessment. Ex consequenti, belief of the AO about any income escaping assessment is sine qua non for initiating re-assessment. No jurisdiction can be assumed for framing assessment under Section 147 of the IT Act absent such reasons to believe about the escapement of income.

The AO initiated re-assessment proceedings just to verify the deposits and withdrawals from the bank account of the assessee. There is no whisper in the reasons as to reason to doubt, much less the reason to believe, about the escapement of income. In view of the fact that the re-assessment has been initiated simply to verify the transactions in the assessee’s bank account, which does not fulfil the jurisdictional condition of belief about the escapement of any income, action of the AO lacks validity. Present Tribunal therefore, set aside the initiation of reassessment and the consequential order passed under Section147 of IT Act. Appeal is allowed.


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