Sanjay Garg, Judicial Member:
1. The present appeal has been filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) [hereinafter referred to as CIT(A)] dated 05.12.11. The Revenue is aggrieved from the action of the ld. CIT(A) in setting aside the assessment order framed by the Assessing Officer (hereinafter referred to as AO) under section 143(3) read with section 147 by holding that the same suffers from lack of jurisdiction on the part of AO.
2. The grounds of appeal for the sake of convenience are reproduced as under:
"1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A)
erred in setting aside the assessment order u/s. 143(3) r.w.s 147 by holding that the same suffers from lack of jurisdiction without appreciating the fact that the notice u/s 148 was issued and duly served on the assessee within the limitation date on 30.03.2010."
2. On the facts and in the circumstances of the case and in law, the CIT(A) erred in setting aside the assessment order without appreciating the fact that the additions made by the AO were based on the materials found at the time of survey proceedings u/s. 133A of the I.T. Act."
3. On the facts and in the circumstances of the case and in law, the CIT(A) erred in quashing the assessment order without deciding the issues of additions on merit."
3. The brief facts of the case are that the return of income of the assessee was processed by the AO under section 143(1) of the 'Income Tax Act' (herein after referred to as 'the Act'). Thereafter the case was selected for scrutiny and a notice under section 143(2) of the Act was issued to the assessee and the assessment under section 143(3) was completed by the AO determining the total income at Rs.4,32,24,440/-. Assessee in appeal before the ld. CIT(A) challenged the legality of issuance of notice under section 143(2) of the Act. The ld. CIT(A), vide his order dated 22.12.06, allowed the appeal of the assessee by holding that the notice issued under section 143(2) was not in time and hence annulled the assessment order. Against the order of the ld. CIT(A) the Revenue filed an appeal to this Tribunal. The Tribunal vide its order dated 17.06.09 passed in ITA No.1166/M/07 dismissed the appeal of the Revenue and upheld the order of the ld. CIT(A).
The AO thereafter observed that since the assessment in this case had been annulled on the legality of notice under section 143(2) of the Act and the case had not been heard on merits at any of the stage including appellate proceedings, hence, there was a reason to believe that the income assessed in this case had escaped assessment to that extent. So after recording above reason, he reopened the assessment under section 147 of the Act by way of issuing notice under section 148 of the Act. The assessee objected to the
validity of the reassessment proceedings. However, he participated in the reassessment proceedings. In the reassessment proceedings, the AO observed that the assessee has been engaged in the business of bar and restaurant. A survey action under section 133A of the Act had been carried out on 23.01.04 at the business premises of the assessee. During the course of survey proceedings certain incriminating documents indicating purchase bills, counter sale slips etc. pertaining to 31.12.03 relevant to financial year 2003-04 had been found and impounded. It was further noted by the survey team that no sale bills pertaining to either the date of survey or to dates of immediately preceding the date of survey were found. The statement of Assistant Manager of the assessee company was also got recorded.
From the statement of Assistant Manager the AO concluded that the assessee had not disclosed his true income and had suppressed the actual sales and therefore inference could be drawn that same state of affairs existed in the assessee's case in the period prior to the date of survey. The AO thereafter treated the amount of Rs.61,110/- found on the date of survey as entertain income as the basis for computing such income for various assessment years. He accordingly assessed the income for this year on the basis of income assessed for the assessment year 2004-05 at Rs.2,15,33,000/-. Aggrieved from the order of the AO, the assessee preferred appeal before the ld. CIT(A).
4. The ld. CIT(A) vide impugned order observed that it is a settled law that AO acquires jurisdiction to reopen assessment under section 147 read with section 148 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. However, in the instant case he found that AO had not come to a conclusion that the information provided by the assessee in the original assessment was not correct. He further observed that for reopening of assessment under section 147, the AO must have some reason to believe that certain income of the assessee has escaped assessment. The expression "reason to believe" implied in the section, presupposes some objectivity of the AO and not mere the subjective satisfaction or any suspicion about the escapement of income. He further observed that in the instance case a mere suspicion of the AO about the escapement of income was not sufficient to justify his action in invoking section 147 of the Act. He further observed that the reopening can not be resorted to after the expiry of four years from the end of relevant assessment order, unless any income chargeable to tax has escaped assessment for such assessment order by reason of failure on the part of assessee to disclose fully and truly all material facts necessary for that assessment year. He further observed that in the case in hand, no incriminating material relevant to assessment year under consideration i.e. assessment year 2003-04 was found during the course of survey on the basis of which a reasonable opinion or belief can be found. Merely stating that the assessee must be adopting the same modus operandi in the earlier years prior to assessment year 2004-05 was a subjective estimate of the AO, which could not form the basis for reopening the assessment. Since in the instant case assessment was reopened after four years, hence the AO had not attributed any failure on the part of the assessee to disclose truly and fully the material which required disclosure for making assessment. He therefore held that the action of the AO in reopening the assessment under section 143(3) read with section 147 suffered from lack of jurisdiction. He accordingly set aside the order of the AO. The Revenue is thus in appeal before us.
5. We have heard the ld. representatives of both the parties and have also gone through the records.
It may be observed from the facts of the case that the AO had reopened the assessment only on the ground that the scrutiny assessment under section 143(3) of the Act was set aside by the higher authorities. In our view, that itself cannot be a ground for reopening of the assessment under section 147 of the Act. Such an action cannot be allowed under the law as it may amount to defeating the one statutory provision in the garb of acting under the other provision of the statute. Once the assessment under section 143(3) has been annulled by the higher authorities, reopening under section 147 on that very ground would mean nothing else, but the abuse of process of law. While holding so, we do not mean that the reopening cannot be done in any case where the assessment has been annulled under section 143(3). The proposition which we wish to point out is that the annulment of assessment done under section 143(3) by the higher judicial authorities, itself, cannot be a ground for reopening. If the AO comes into the knowledge of any new material from which he has reason to believe that certain income of the assessee has escaped assessment, he can reopen the assessment. We agree with the observation of the ld. CIT(A) that the "reason to believe" must be founded on the basis of some material and it must not be just the imagination or suspicion of the AO. In the case in hand no new material or evidence had come into the notice of the AO from which he would have got reason to believe for reopening of the assessment. Hence, the ld. CIT(A), in our view, was justified in setting aside the reopening of the assessment. Moreover, in this case no incriminating material relevant to assessment year under consideration was found during the survey action. The income for this year was assessed by the AO on the basis of assumption while assessing the income of the assessee for assessment year 2004-05 assuming that the assessee might be adopting the act of suppression of income for earlier years also. The ld. representative of the assessee has brought our attention to the fact that the Hon'ble jurisdictional High Court vide order dated 28.02.13 passed in ITA No.48/2013 has upheld the decision of the Tribunal in deleting the addition made on the basis of survey action by the AO for assessment year 2004-05. Since the additions made for assessment year 2004-05 have already been set aside and upheld by the Hon'ble jurisdictional High Court, hence under such circumstances, the very basis upon which the additions were made for the assessment year under consideration has ceased to exist. So the additions made by the AO on the basis of assessment of income for the assessment year 2004-05 are not sustainable in law even on merits also. We do not find any merit in the appeal of the Revenue either on the ground of setting aside of reopening or on the merits of the case.
6. In the result, in view of our observations made above, the appeal filed by the Revenue is hereby dismissed.