Tribunal dismisses revenue's appeal, upholds assessee's objection on assessment reopening. Clarifies "reason to believe" vs. "reason to suspect."

The tribunal dismissed the revenue's appeal and allowed the assessee's cross-objection, quashing the reopening of the assessment. The tribunal held that the AO lacked valid "reason to believe" that income had escaped assessment, emphasizing the need for concrete evidence. The decision was based on the insufficiency of material to support the reopening, highlighting the distinction between "reason to believe" and "reason to suspect." The order was issued on 17th December 2021.

---

---

Issues Involved:
1. Delay in filing the appeal by the revenue.
2. Deletion of addition by CIT(A) amounting to Rs. 4,70,08,000.
3. Jurisdiction of the Assessing Officer (AO) to reopen the assessment under Section 147 of the Income Tax Act.
4. Merits of the evidence provided by the assessee regarding the transactions.
5. Compliance with summons issued by the AO.

Detailed Analysis:

1. Delay in Filing the Appeal by the Revenue:
The revenue filed the appeal with a delay of 37 days. A condonation petition was filed, and the tribunal found the reasons for the delay reasonable. Therefore, the delay was condoned, and the appeal was admitted for hearing.

2. Deletion of Addition by CIT(A) Amounting to Rs. 4,70,08,000:
The revenue contested the deletion of an addition of Rs. 4,70,08,000 by the CIT(A). The CIT(A) had deleted the addition on the grounds that the necessary evidence was furnished by the assessee, which contradicted the findings of the AO. The tribunal examined whether the CIT(A) erred in deleting the addition without considering the merits of the case as elaborated by the AO.

3. Jurisdiction of the AO to Reopen the Assessment under Section 147 of the Income Tax Act:
The assessee raised a legal issue challenging the jurisdiction of the AO to reopen the assessment, which was completed earlier under Section 143(3) of the Act. The AO reopened the assessment based on information received from the investigation wing, which indicated that the assessee had received accommodation entries from a shell company, M/s. Bridge & Building Construction Company Pvt. Ltd., controlled by Shri Ajit Kumar Jindal. The tribunal focused on whether the AO had "reason to believe" that income had escaped assessment, a prerequisite for reopening an assessment under Section 147. The tribunal noted that the AO's reasons for reopening were based on a general statement by Shri Ajit Kumar Jindal, who admitted to providing accommodation entries. However, there was no specific mention of the assessee in the recorded reasons. The tribunal emphasized that "reason to believe" must be based on concrete information and not merely on suspicion. The tribunal found that the AO did not have sufficient material to form a belief that income had escaped assessment and thus quashed the reopening.

4. Merits of the Evidence Provided by the Assessee Regarding the Transactions:
The assessee argued that all necessary evidence regarding the transactions was furnished during the original assessment, and the department failed to controvert the same. The CIT(A) accepted this argument and deleted the addition. The tribunal examined whether the evidence provided by the assessee was sufficient and whether the CIT(A) rightly deleted the addition. The tribunal noted that the AO did not conduct a preliminary inquiry to verify the authenticity of the transactions and relied solely on the statement of Shri Ajit Kumar Jindal.

5. Compliance with Summons Issued by the AO:
The revenue argued that the assessee and the party did not comply with the summons issued by the AO, which hindered the proper examination of documentary evidence. The tribunal considered whether the non-compliance with the summons affected the validity of the AO's findings. The tribunal found that the AO's reasons for reopening the assessment were not substantiated by concrete evidence, and thus, the non-compliance with the summons did not justify the reopening of the assessment.

Conclusion:
The tribunal quashed the reopening of the assessment, holding that the AO did not have valid "reason to believe" that income had escaped assessment. Consequently, the appeal of the revenue was dismissed, and the cross-objection of the assessee was allowed. The tribunal emphasized the necessity of concrete evidence to justify the reopening of an assessment and the distinction between "reason to believe" and "reason to suspect." The order was pronounced on 17th December 2021.

---