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Judgment
PER M. BALAGANESH, A. M.:
The appeals in ITA Nos. 4653 and 4654/Del/2025 for AYs 2011-12 and 2012-13, arise out of the order of the ld National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 17.07.2025 against the order of assessment passed u/s 147 r.w.s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 21.12.20185 and 19.09.2019 respectively by the Assessing Officer, DCIT, Circle-1(1), Gurgaon (hereinafter referred to as ‘ld. AO’). Identical issues are involved in all these appeals and hence they are taken up together and disposed of by this common order for the sake of convenience.
We have heard the rival submissions and perused the materials available on record. The assessee is a partnership firm and had filed its regular return of income for AY 2011-12 on 22.09.2011 declaring total income of Rs. 2,44,00,855, which was duly processed u/s 143(1) of the Act. Scrutiny assessment was framed u/s 143(3) of the Act on 14.03.2014 determining total income of ₹2,49,74,900/-.
The assessee filed its return of income for AY 2012-13 on 28.09.2012 and revised return of income was filed on 29.09.2012, declaring income of ₹4,96,40,684. Assessment u/s 143(3) was completed on 14.03.2014, determining total income of ₹5,02,03,110.
Both the assessment years were sought to be reopened u/s 147 of the Act by the ld AO on the basis of information received from the Office of the DCIT, Central Circle-II, Gurgaon wherein it was intimated that Shri Harinder Sharma, who was an employee of assessee, had stated that assessee was not doing any actual business activity. Notice u/s 148 of the Act stood issued to the assessee on 28.03.2018 for AY 2011-12 and on 30.03.2019 for AY 2012-13. Admittedly reopening has been made beyond the period of four years from the end of the relevant assessment year for both the years under consideration before us. Since, the assessments are earlier completed u/s 143(3) of the Act and reopening is made beyond four years, the first proviso to section 147 would come into operation wherein it is the duty of the ld AO to mention the fact of failure committed by the assessee to make the full and true disclosure of all material facts that are relevant for the purpose of assessment. The reasons recorded for reopening of the assessment are enclosed in pages 109 to 110 of the paper book for AY 2011-12 and are enclosed at pages 109 to 110 of the paper book for assessment 2012-13. From the perusal of the reasons, we find that there is absolutely no mention by the ld AO regarding the failure committed by the assessee to make full and true disclosure of all material facts that are relevant for the purpose of assessment. Hence, there is a direct violation of first proviso to section 147 committed by the ld AO. The Hon’ble Bombay High Court in the case of Hindustan Lever Ltd. Vs. R.B. Wadker reported into 268 ITR 332 (Bom) had observed as under:-
20.The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced.
Respectfully following the aforesaid decision, we quash the reassessment proceedings on the ground of invalid assumption of jurisdiction by the ld AO for both the years under consideration.
Further, we find that the ld AO in the reasons recorded had mentioned that no return of income was filed by the assessee and no scrutiny assessment has been framed for the years under consideration, which is also factually incorrect. Hence, it could be safely concluded that the reopening has been made based on incorrect assumption of fact, which also would make the assumption of jurisdictional totally flawed.
Since the reopening proceedings are quashed for more than one reason as detailed supra, the other legal and factual grounds raised by the assessee need not be gone into and they are left open.
In the result, both the appeals of the assessee are partly allowed.