Uttarakhand Poorv Sainik Kalyan Nigam Ltd. v. ITO: AO Cannot Reopen Assessment Without Material Evidence
Introduction
The Income Tax Appellate Tribunal (ITAT) Dehradun recently decided a landmark case that has important implications for taxpayers. In the case of Uttarakhand Poorv Sainik Kalyan Nigam Ltd. v. ITO (ITAT Dehradun); ITA No. 3129/Del/2018, the ITAT held that the assessing officer (AO) cannot reopen an assessment simply because he has a hunch that the assessee has understated its income. The AO must have material on the basis of which he can form a belief that the assessee has understated its income.
Facts of the Case
The assessee in this case was Uttarakhand Poorv Sainik Kalyan Nigam Ltd., a company that provides employment to ex-servicemen and their dependencies. The assessee filed its return of income for the assessment year 2012-13 on December 31, 2012. On February 25, 2015, the AO issued a notice under section 148 of the Income Tax Act, 1961 (ITA) to the assessee, reopening its assessment for the assessment year 2012-13. The AO’s reason for reopening the assessment was that he had reason to believe that the assessee had understated its income for the assessment year 2012-13.
The Assessee’s Challenge
The assessee challenged the AO’s decision to reopen the assessment before the ITAT. The assessee argued that the AO had no reason to believe that it had understated its income for the assessment year 2012-13. The assessee also argued that the AO had not followed the due process of law in reopening the assessment.
The ITAT’s Decision
The ITAT agreed with the assessee and quashed the AO’s decision to reopen the assessment. The ITAT held that the AO had not shown any material on the basis of which he could have formed a belief that the assessee had understated its income for the assessment year 2012-13. The ITAT also held that the AO had not followed the due process of law in reopening the assessment.
Significance of the Decision
The ITAT’s decision in this case is significant because it establishes that the AO cannot reopen an assessment simply because he has a hunch that the assessee has understated its income. The AO must have material on the basis of which he can form a belief that the assessee has understated its income. The AO must also follow the due process of law in reopening the assessment.
The ITAT’s decision in this case is a victory for taxpayers and will help to protect them from arbitrary and unfair reassessment proceedings.
