2018 (1) TMI 1446 - AT - Income Tax

Invalid Re-assessment Initiation: Lack of Material & Interest Charges Unjustified

Priyank Mittal Versus ITO, -5 (3), Firozabad

The Tribunal held that the initiation of re-assessment proceedings under Sections 147/148 was invalid due to lack of specific and tangible material. ... Reopening of assessment - bogus entry of gift given by Sh. Gupta to the assessee - eligibility of reasons to believe - HELD THAT:- A perusal of the reasons recorded by the AO shows that the allegation as per the reasons to believe escapement of income is bogus purchase/sale of shares, while the impugned addition has been made with respect to gift, which shows that the A.O. had no specific information. Hence, as rightly contended, the reasons recorded are vague and farfetched. Assessee categorically submitted that he had not entered into any transaction of purchase/sale of shares. No new adverse information has been brought on record which could suggest any justification for satisfaction to initiate proceedings u/s 147/148, in spite of specific request of the appellant vide letter dt. 24.11.2010. In the proceedings u/s 147, the burden is on the A.O. to prove income escaping assessment as it is the belief of the A.O. for income escaping assessment which can trigger such proceedings. This onus has not been discharged by the AO herein, rendering the initiation of the reassessment proceedings void. - Decided in favour of assessee. Issues Involved:1. Validity of Re-assessment Proceedings under Sections 147/148.2. Confirmation of Addition of Rs. 5,01,250/-.3. Interest Charged under Sections 234B, 234C, and 234D.Issue-wise Detailed Analysis:1. Validity of Re-assessment Proceedings under Sections 147/148:The primary contention raised by the assessee was that the initiation of re-assessment proceedings under Sections 147/148 was invalid, perverse, and based on mere suspicion and vague information. The Assessing Officer (AO) initiated re-assessment based on information from the Additional Director of Income Tax (Investigation), Agra, indicating that the assessee received a bogus entry of Rs. 5,01,250/- from an individual named Deepak Gupta. The AO recorded reasons for re-assessment, citing the receipt of bogus sale proceeds of shares, which he believed led to income escaping assessment.The assessee argued that the reasons recorded for re-assessment were vague and farfetched, asserting that the AO had no specific information and that the burden of proving income escaping assessment lay with the revenue. The AO's belief was based on information from the Investigation Wing without further examination, which the assessee contended was insufficient for initiating re-assessment proceedings.The CIT(A) upheld the AO's decision, stating that the AO had definite information from the Investigation Wing, which formed a valid basis for initiating re-assessment. However, the Tribunal found that the reasons recorded by the AO were not specific and were based on general information, rendering the initiation of re-assessment proceedings void. The Tribunal concluded that the AO did not discharge the onus of proving income escaping assessment, making the re-assessment proceedings invalid.2. Confirmation of Addition of Rs. 5,01,250/-:The assessee challenged the addition of Rs. 5,01,250/- made by the AO, arguing that the amount credited in the Union Bank account was fully explained as a gift received and confirmed by the donor. The assessee provided material evidence, including confirmation from Jai Lakshmi Co-Operative Bank Ltd. and an affidavit from the donor, to substantiate the claim.The CIT(A) confirmed the addition, stating that the AO had formed a valid belief based on definite information from the Investigation Wing that the transaction was bogus. The Tribunal, however, found that the AO's reasons for re-assessment were vague and not supported by any new adverse information. The Tribunal noted that the AO's allegation of bogus purchase/sale of shares contradicted the addition made for the gift, indicating a lack of specific information.The Tribunal concluded that the AO did not provide sufficient evidence to justify the addition and that the reasons recorded for re-assessment were not valid. Therefore, the addition of Rs. 5,01,250/- was not sustainable.3. Interest Charged under Sections 234B, 234C, and 234D:The assessee also contested the interest charged under Sections 234B, 234C, and 234D, arguing that it was wrong, illegal, and excessive. However, since the Tribunal found the initiation of re-assessment proceedings invalid and quashed the re-assessment order, the issue of interest charges became moot.Conclusion:The Tribunal allowed the appeal, holding that the initiation of re-assessment proceedings under Sections 147/148 was invalid due to the lack of specific and tangible material. Consequently, the addition of Rs. 5,01,250/- was not justified, and the interest charges under Sections 234B, 234C, and 234D were rendered irrelevant. The Tribunal's decision emphasized the necessity for the AO to have specific and reliable information before initiating re-assessment proceedings.