Non-Filing of Income Tax Return amounts to Escapement of Income: ITAT upholds Reassessment u/s 147
November, 10th 2022
The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has recently, in an appeal filed before it, while upholding the reassessment under section 147 of the Income Tax Act, 1961, held that non filing of income tax return amounts to escapement of income.
The aforesaid observation was made by the Mumbai lTAT when an appeal was preferred before it an appellant, as against the order dated 16/10/2019, passed under section 250 of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals) Mumbai, for the assessment year 2010–11.
The facts of the case were that the assessee was an individual who was engaged in the business of trading in shares. The assessee was also the director of M/s Sanghi Corporate Service Ltd, and for the year under consideration, the he did not file his return of income.
Subsequently, on the basis of information received from ITD systems, reassessment proceedings were initiated against the assessee and notice under section 148 of the Income Tax Act was issued on 17/03/2015 after recording of reasons. And in response to the same, the assesse had electronically filed the return of income on 02/04/2015, declaring his total income as NIL.
Pursuant thereto, statutory notices under section 143(2) and 142(1) of the Act were issued and the assessee filed its reply to the information/details sought. And after considering the submissions of the assessee, the Assessing Officer (AO) vide his order dated 10/02/2016, passed under section 143(3) r/w section 147 of the Income Tax Act, assessed the total income at Rs. 44,50,240, after making certain additions to the income returned by the assessee.
And against the same, the assessee had preferred an appeal before the CIT(A), but the addition being made by the AO being confirmed by the CIT(A), the assessee was left with no other option but to prefer the instant appeal before the ITAT Bench.
With Shri Piyush Chhajed along with Shri Sumit Mantri, submitting on behalf of the assesse that the assessee had no taxable income during the year under consideration and it was because of the same that no return of income was filed by the assessee, and further that it was merely on the basis that cash had been deposited by the assessee, that the proceedings under section 147 were initiated by the AO, Shri Ajeya Kumar Ojha , the DR for the Revenue submitted that no return was filed by the assessee for the year under consideration and that after receipt of the information from ITD system, facts were verified.
He also added that it was noticed that the assessee had entered into certain transactions viz. cash deposit of Rs. 50,000 and more, share transaction of Rs. 20,000, or more and TDS return in respect of interest other than interest on securities, during the year under consideration, and that despite these said transactions, the assessee did not file the return of income.
Hearing the opposing contentions of both the sides and perusing the materials available on record, the ITAT Bench consisting of Om Prakash Kant, the Accountant Member, along with Sandeep Singh Karhail, the Judicial Member, observed:
“If there is reasonable information on the basis of which reasonable person can form a requisite belief that income chargeable to tax has escaped assessment, then proceedings under section 147 of the Act can be validly initiated. Further, it is also well settled that sufficiency or correctness of the material is not a thing to be considered at the stage of recording of reasons.”
“Therefore, we are of the considered view that the AO had “reason to believe” on the basis of tangible material for initiating proceedings under section 147 of the Income Tax Act.”, dismissing the asssessee’s claim, the ITAT Bench ruled.