2017 (11) TMI 856 - AT - Income Tax

Invalid initiation of proceedings under Sections 147/148 overturned, reassessment quashed, appeal allowed.

Madan Lal Chaudhary Versus Income-tax Officer, Ward 36 (3), New Delhi

Madan Lal Chaudhary Versus Income-tax Officer, Ward 36 (3), New Delhi - Tmi Issues Involved:1. Validity of proceedings initiated under Section 148 of the Income-tax Act, 1961.2. Non-disposal of objections raised by the appellant against the reopening of the assessment.3. Additions made under Section 69A and Section 69C of the Income-tax Act, 1961.Issue-wise Detailed Analysis:1. Validity of Proceedings Initiated Under Section 148:The assessee challenged the initiation of proceedings under Section 148, arguing that there were no valid reasons recorded for the belief of income escapement. The Tribunal found that the Assessing Officer (AO) relied solely on information from the Investigation Wing without applying his own mind or bringing any tangible material on record. The recorded reasons were deemed conclusions rather than reasons, lacking the necessary link between the information and the belief of income escapement. The Tribunal cited the decision in Pr. CIT vs. Meenakshi Overseas Pvt. Ltd., emphasizing that the reasons must be self-evident and demonstrate a link between tangible material and the belief of income escapement. The Tribunal concluded that the initiation of proceedings under Section 147/148 was invalid.2. Non-disposal of Objections Raised by the Appellant:The assessee contended that the AO did not dispose of the objections raised against the reopening of the assessment, violating the principles laid down by the Hon’ble Supreme Court in GKN Driveshafts (India) Ltd. Vs. ITO. However, the Tribunal found no evidence of such objections being filed by the assessee. The AO and the Commissioner of Income Tax (Appeals) [CIT(A)] both confirmed that no objections were recorded. The Tribunal upheld the CIT(A)'s finding that the assessee failed to provide any copy of the objections, thus rejecting this contention.3. Additions Made Under Section 69A and Section 69C:The AO made additions of Rs. 6,00,000 under Section 69A, treating the gifts received as income from undisclosed sources, and Rs. 12,000 under Section 69C as unexplained expenditure for commission paid to obtain accommodation entries. The AO's decision was based on the statements of the alleged donor, who admitted that the bank accounts were used for providing accommodation entries, casting doubt on the creditworthiness and genuineness of the transactions. The CIT(A) confirmed these additions. However, since the Tribunal found the initiation of proceedings under Section 147/148 invalid, it did not delve into the merits of these additions.Conclusion:The Tribunal set aside the CIT(A)'s order, holding the initiation of proceedings under Section 147/148 as invalid, thereby quashing the reassessment. Consequently, the Tribunal did not consider the merits of the additions made under Sections 69A and 69C. The appeal of the assessee was allowed, and the reassessment was quashed due to the invalid initiation of proceedings.Order Pronouncement:The order was pronounced in the open court on 14.11.2017.