2019 (11) TMI 137 - AT - Income Tax

Appeal allowed: Notice under Income Tax Act quashed for lack of independent assessment.

Magan Behari Lal Versus DCIT, Circle-16 (2), C.R. Building, I.P. Estate, New Delhi

The appeal was allowed, quashing the notice issued under Section 148 of the Income Tax Act due to the lack of independent application of mind by the ... Reopening of assessment u/s 147 - assessment has been reopened solely on the basis of information received from Pr. DIT(Inv.), Ahmedabad - Non independent application of mind - HELD THAT:- Assessment has been carried away by the report of the investigation wing without making any independent verification to justify the reopening. The Hon’ble High Court of Bombay in the case of Coronation Agro Industries Ltd. vs DCIT [2017 (1) TMI 904 - BOMBAY HIGH COURT] had an occasion to consider an identical issue with identical set of facts has held that notice u/s 148 of the Act is without jurisdiction Reasons recorded for reopening of the assessment are devoid of any independent application of mind by the AO and therefore, the notice issued u/s 148 of the Act deserves to be quashed. - Decided in favour of assessee. Issues Involved:1. Validity of proceedings initiated under Section 148 of the Income Tax Act.2. Addition of Rs. 46,05,594 to the returned income of the assessee.Issue-wise Detailed Analysis:1. Validity of proceedings initiated under Section 148 of the Income Tax Act:The assessee challenged the validity of the proceedings initiated under Section 148 of the Income Tax Act, arguing that the Assessing Officer (AO) relied solely on information received from the Principal Director of Income Tax (Investigation), Ahmedabad, without applying his own mind. The assessee's counsel cited multiple judicial decisions where reassessment proceedings were quashed due to lack of independent application of mind by the AO.The Revenue countered that at the stage of reopening the assessment, the AO only needs to establish a prima facie case, citing decisions from the Supreme Court and various High Courts to support their position.Upon reviewing the case, it was found that the AO initiated reassessment solely based on the information from the Investigation Wing without any independent verification. The judgment referenced several High Court decisions, including:- Coronation Agro Industries Ltd. vs DCIT [390 ITR 464 (Bom.)]: The Bombay High Court held that notice under Section 148 was without jurisdiction as it lacked an independent application of mind by the AO.- Harikishan Sunderlal Virmani vs DCIT [303 CTR (Guj.) 214]: The Gujarat High Court quashed the notice issued under Section 148 due to the absence of independent opinion by the AO and reliance on borrowed satisfaction.- PCIT vs Meenakshi Overseas (P.) Ltd. [395 ITR 677 (Del.)]: The Delhi High Court emphasized that the reasons to believe must demonstrate a link between the tangible material and the formation of belief of income escaping assessment. The court noted that the AO must arrive at a subjective satisfaction independently on an objective criterion.The judgment concluded that the reasons recorded for reopening the assessment lacked independent application of mind by the AO and were solely based on the information received from the Investigation Wing. Therefore, the notice issued under Section 148 was quashed.2. Addition of Rs. 46,05,594 to the returned income of the assessee:Given that the reopening of the assessment was quashed, the assessment order was deemed invalid. Consequently, the Tribunal did not find it necessary to delve into the merits of the additions made by the AO.Conclusion:The appeal filed by the assessee was allowed on the point of law, quashing the notice issued under Section 148 of the Income Tax Act due to the lack of independent application of mind by the AO. The order was pronounced in the open court on 16/09/2019.