2018 (10) TMI 143 - AT - Income Tax

Invalid Reopening of Assessment under Income-tax Act: Lack of Independent Application of Mind

Rajender Parsad Prop. M/s. Priya Enterprises Versus The I.T.O, Ward 63 (3), New Delhi

The Tribunal held that the reopening of the assessment under Section 147 read with Section 143(3) of the Income-tax Act, 1961 was invalid due to the lack ... Reopening of assessment - non independent application of mind - borrowed information - non filing of ROI - Held that:- In the penultimate para, the Assessing Officer has emphasised that the assessee did not file any return of income for the year under consideration whereas, as mentioned elsewhere, on page 2 of the assessment order, the Assessing Officer himself has admitted that return of income for the year under consideration was filed on 18.10.2007. Considering the reasons recorded by the Assessing Officer, which are undisputedly borrowed from somewhere else and considering the fact that he Assessing Officer has emphasised that the assessee did not file any return of income by contradicting himself in the body of the assessment order by admitting that return was filed on 18.10.2007 establishes only and only one thing, that notice u/s 148 vis a vis reasons are devoid of any application of mind. Reopening of the assessment is without any application of mind and examination of the facts. According, reopening is held to be invalid and the same is quashed. - Decided in favour of assessee Issues Involved1. Validity of the reopening of the assessment under Section 147 read with Section 143(3) of the Income-tax Act, 1961.2. Merits of the addition of Rs. 10,93,580/- to the income of the assessee.Detailed Analysis1. Validity of the Reopening of the AssessmentThe primary issue raised by the assessee was the validity of the reopening of the assessment under Section 147 read with Section 143(3) of the Income-tax Act, 1961. The assessee argued that the reopening was bad in law. The facts of the case revealed that the assessee, a proprietor of M/s Priya Metals engaged in the trading of metals, had filed a return declaring an income of Rs. 1,42,145/-. This return was initially processed under Section 143(1). Subsequently, information was received from the ACIT, Central Circle 10, New Delhi, indicating that the assessee was involved in bogus purchases/accommodation entries provided by certain individuals. This information was forwarded through the CIT, Central Circle 2, New Delhi, and CCIT, New Delhi-1, and a CD containing the details was provided.The Assessing Officer (AO) formed a belief that income amounting to Rs. 10,93,580/- had escaped assessment and issued a notice under Section 148 for reopening the assessment. The reasons for reopening were based on information received from the Directorate of Investigation, which indicated that the assessee had introduced its own unaccounted money by way of accommodation entries.The Tribunal observed that the AO had borrowed the findings from the investigation wing without any independent application of mind. The reasons recorded for reopening the assessment were based on borrowed information and lacked independent verification. The AO's emphasis that the assessee did not file any return of income was contradicted by his own admission that a return was filed on 18.10.2007. This contradiction and the reliance on borrowed reasons indicated a lack of application of mind by the AO.The Tribunal cited several judicial precedents, including the case of G & G Pharma India Ltd (545/DEL/2015) and Sarthak Securities Pvt. Ltd (329 ITR 110), to support its conclusion that the reopening of the assessment was invalid. The Tribunal held that the reopening of the assessment under Section 147 was bad in law and directed it to be quashed.2. Merits of the Addition of Rs. 10,93,580/-Given that the reopening of the assessment was held to be invalid, the Tribunal did not find it necessary to dwell into the merits of the case regarding the addition of Rs. 10,93,580/- to the income of the assessee. The appeal filed by the assessee was allowed solely on the grounds of the invalidity of the reopening of the assessment.ConclusionThe Tribunal concluded that the reopening of the assessment under Section 147 read with Section 143(3) of the Income-tax Act, 1961, was invalid due to the lack of independent application of mind by the AO and reliance on borrowed reasons. Consequently, the appeal filed by the assessee was allowed, and the reopening of the assessment was quashed. The merits of the addition of Rs. 10,93,580/- were not addressed due to the invalidity of the reopening. The judgment was pronounced in the open court on 07.09.2018.