2020 (8) TMI 589 - AT - Income Tax

Reopening of Assessment Invalidated: Lack of Reasoning and Factual Errors

Shri Raj Kumar Maheshwari Versus The Income Tax Officer, Ward 4 (4), Jaipur.

Shri Raj Kumar Maheshwari Versus The Income Tax Officer, Ward 4 (4), Jaipur. - TMI Issues Involved:1. Validity of reopening of assessment under section 148.2. Assessment of income under section 144 ignoring evidence and deductions.3. Addition of Rs. 3,85,336 on account of credit card payment without considering bank account details.Issue-Wise Detailed Analysis:1. Validity of Reopening of Assessment under Section 148:The primary issue is whether the reopening of the assessment under section 148 was valid. The assessee argued that the reopening was based on incorrect information and mere suspicion without a valid reason to believe that income had escaped assessment. The AO issued a notice under section 148 based on AIR data indicating the assessee paid Rs. 3,85,336 against credit card bills and had not filed a return of income for the relevant year. The assessee contended that the return was filed on 9th July 2010, which was acknowledged by the department, and the reopening was invalid as it ignored this fact. The Tribunal found that the AO's reasons for reopening were factually incorrect, as the return was indeed filed, and the belief of income escapement was based on incorrect assumptions. Consequently, the reopening was quashed as invalid.2. Assessment of Income under Section 144 Ignoring Evidence and Deductions:The assessee challenged the assessment under section 144, arguing that the AO ignored evidence of TDS and deductions claimed in the return filed under section 139(4). The return showed income from salary, deductions under chapter VIA, and TDS, which were verifiable from Form No. 16, LIP receipts, and the bank statement. The Tribunal noted that the AO did not consider these details and the return filed by the assessee was mistakenly considered for the assessment year 2010-11 instead of 2009-10. The Tribunal found the assessment under section 144 unjustified as it ignored the available evidence and deductions.3. Addition of Rs. 3,85,336 on Account of Credit Card Payment without Considering Bank Account Details:The AO added Rs. 3,85,336 to the income on account of credit card payments without verifying the bank account of the assessee. The assessee argued that all transactions were through the bank account and online payments. The Tribunal observed that the AO failed to consider these facts and the transactions were verifiable from the bank account. The addition was made on mere suspicion without proper verification, leading to an arbitrary assessment.Conclusion:The Tribunal quashed the reopening of the assessment under section 148, finding it invalid due to incorrect facts and lack of application of mind by the AO. Consequently, the assessment under section 144 and the addition of Rs. 3,85,336 were also invalidated. The appeal of the assessee was allowed, and the reassessment order was set aside.