The court held that re-assessment proceedings based on erroneous facts and lack of adequate disclosure by the Assessing Officer are invalid.

ORDER

PER SUDHIR KUMAR, JM:

This appeal by the assessee is directed against the order of National Faceless Appeal Centre (NFAC) Delhi [hereinafter referred to as “Ld. NFAC”], vide order dated 20.02.2024 pertaining to A.Y. 2011-12 and arises out of the assessment order dated 14-12-2018 passed by the Assessing Officer under Section 143 (3) r.w.s. 147 of the Income Tax Act, 1961 [hereinafter referred as ‘the Act’].

2. The assessee raised the following grounds in appeal:

1. That the Ld. Commissioner of Income Таx (Appeals) has erred in law as well as on facts in upholding the initiation of proceedings under section 148 in as much as there was no escapement of income leading to a reason to belief and as such the re-opening is illegal, arbitrary and unjustified.

2. That the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in upholding the initiation of proceedings under section 148 in as much as there has been no reason to believe that there was an escapement of income and the reasons recorded are based only on borrowed information and as such upholding of the assessment passed u/s 147 is illegal, arbitrary and unjustified.

3. That Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts upholding the initiation of proceedings u/s 148 despite the assessment having already been framed and completed twice over u/s 143(3) vide order dated 25.02.2014 and thereafter again under section 143(3) read with section 263 vide order dated 15.12.2016 which is only a change of opinion and as such upholding of the assessment passed u/s 147 is illegal, arbitrary and unjustified.

4. That Ld. Commissioner of Income Tax (Appeals) has erred in rejecting the application filed under Rule 46A of the Act for admission of additional evidence which evidence goes to the root of the matter and as such the order passed is arbitrary and unjustified.

5. Without prejudice to the above, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the addition of Rs.78,00,000/- made on account of alleged unexplained investment in purchase of property treating the same to be income u/s 69 in utter disregard of the explanations rendered which is arbitrary and unjustified.

3. The brief facts of the case are that the assessee filed its return of income on 30-03-2012 declaring a total income of Rs. 1,66,230/- + Rs.1,23,000/-(Agriculture Income) which was processed vide order dated 21-07-2012 u/s 143(1) of the Act. The case of the assessee was selected into scrutiny under CASS. Accordingly notice u/s 143(2) of the Act dated 28-09-2012 was issued. A fresh notice u/s 142(1) was issued to the assessee. The Assessing Officer completed the assessment after making the addition of Rs.2,00,000/- as agreed by the ld.AR of the assessee for the A.Y.2011-12. Therefore, the assessment order was set aside under section 263 of the Act by the Principal Commissioner of Income Tax, Karnal vide order dated 11-02- 2016 and revised assessment was framed at income of Rs,1,08,67,030/-. Aggrieved the revised assessment order dated 15-12-2016 the assessee preferred the appeal, which is pending before the Ld. CIT(A), after remand from the Hon’ble ITAT. During the pendency of the aforesaid proceedings, notice u/s 148 of the Act dated 28-03-2018 was issued to the assessee. The reason for re-opening was recorded by the Assessing officer was that the assessee had purchased immovable property from Sh. Ishwar Singh for Rs.78 Lacs, whereas the sale deed was executed for Rs. 15 Lacs during the F.Y.2011-12. Notice under section 148 of the Act was issued to the assessee on 26/28-03- 2018 after taking the approval from the Pr. Commissioner of Income Tax. The reasons for re-opening of the assessment by the Assessing officer as under:

This assessee is an i