2021 (4) TMI 193 - AT - Income Tax

Tribunal quashes assessment due to lack of diligence by Assessing Officer

The Tribunal allowed the assessee's appeal, quashing the assessment due to the non-application of mind by the Assessing Officer. The Tribunal found ... Reopening of assessment - notice under section 148 - reasons recorded - non-application of mind - addition under section 68 - reliance on Investigation Wing material - quashing of assessmentReopening of assessment - notice under section 148 - reasons recorded - non-application of mind - reliance on Investigation Wing material - quashing of assessment - Validity of reopening of assessment and consequent assessment framed where reasons recorded showed factual inconsistencies and AO failed to apply his mind - HELD THAT: - The Tribunal found that the AO issued notice under section 148 alleging escapement of income of Rs. 75 lacs but thereafter, after considering the assessee's reply and documents, made an addition of Rs. 15 lacs under section 68. The mismatch between the reasons recorded for reopening and the quantum/addition ultimately made, together with the summary disposal of the assessee's objections, demonstrated that the AO had not verified or applied his mind to the information supplied by the Investigation Wing. The Tribunal relied on a recent coordinate decision in which similar factual errors in the reasons recorded and unverified reliance on Investigation Wing material led to quashing of the reassessment (paras. 5 and 5.1). Applying that precedent and on the facts of the present case, the Tribunal concluded that the reopening was based on incorrect/non-existing material and was therefore without application of mind, rendering the assessment bad in law and liable to be quashed. [Paras 5]Reopening and assessment are quashed for non-application of mind; appeal allowed.Final Conclusion: The reassessment initiated by notice under section 148 and the assessment framed thereafter are quashed for want of application of mind; the assessee's appeal is allowed. Issues:Reopening of assessment under section 147 of the Income Tax Act, 1961 based on accommodation entry, Addition made under section 68 of the Act, Non-application of mind by Assessing Officer, Justification for reopening assessment, Similar cases where assessment was quashed, Application of mind by the assessing authority.Analysis:Reopening of Assessment under Section 147:The case involved the reopening of the assessee's assessment under section 147 of the Income Tax Act, 1961, based on an accommodation entry. The Assessing Officer (AO) issued a notice under section 148 of the Act for escapement of income. However, the AO made an addition of Rs. 15 lakhs under section 68 of the Act, contrary to the initial claim of Rs. 75 lakhs. The Tribunal found this discrepancy as a clear indication of non-application of mind by the AO, rendering the assessment bad in law.Addition Made under Section 68:The AO's decision to add Rs. 15 lakhs under section 68 of the Act was deemed unjustified due to the discrepancy between the alleged amount in the notice and the actual addition made. The Tribunal highlighted that the AO did not verify the information properly, leading to an incorrect assessment. The case was compared to similar instances where assessments were quashed due to similar factual errors and lack of application of mind by the assessing authority.Non-Application of Mind by Assessing Officer:The Tribunal emphasized the importance of the AO applying his mind diligently while making assessments. It was noted that the AO's reliance on incorrect and non-existing material without proper verification led to an erroneous assessment. The Tribunal cited a previous judgment where assessments were invalidated due to the AO's failure to verify information supplied by the Investigation Wing, indicating a recurring issue of non-application of mind by the assessing authority.Justification for Reopening Assessment:The Tribunal found that the reasons recorded for reopening the assessment were based on incorrect and non-existing material, indicating a lack of justification for the reassessment. The Tribunal reiterated that assessments should be made after careful consideration of all relevant facts and evidence to ensure the legality and validity of the process.Similar Cases Where Assessment Was Quashed:The Tribunal referenced previous cases where assessments were quashed under similar circumstances, highlighting a consistent pattern of incorrect assessments and lack of due diligence by the assessing authority. By following the precedent set in these cases, the Tribunal decided to quash the assessment in the present case as well.Application of Mind by the Assessing Authority:The Tribunal's decision to quash the assessment was based on the principle of ensuring that the assessing authority applies its mind properly and verifies all information before making additions or reassessments. By emphasizing the need for diligence and accuracy in assessments, the Tribunal upheld the importance of legal procedures and fair practices in tax matters.In conclusion, the Tribunal allowed the assessee's appeal, quashing the assessment due to the non-application of mind by the Assessing Officer and following the precedent set in similar cases where assessments were invalidated for similar reasons.