AO's reassessment notice under Section 148 quashed for lacking tangible material and relying on mere suspicion

Delhi HC quashed reassessment notice u/s 148 issued to assessee. AO attempted reassessment by merely comparing balance sheet figures between assessment years without proper inquiry. Notice dated 20.03.2018 seeking information could not reach assessee due to incomplete address. AO lacked tangible material including shareholder list and failed to furnish supporting documents from ITO and ADIT. Court held AO did not have sufficient material to form belief that income escaped assessment, relying only on suspicion and conjecture rather than concrete evidence.

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Issues Involved:
1. Legality of the reassessment proceedings initiated under Section 148 of the Income-tax Act, 1961.
2. Adequacy of the material and information furnished by the Assessing Officer (AO) to the petitioner/assessee.
3. Validity of the AO's "reason to believe" that income chargeable to tax had escaped assessment.

Summary:

Legality of the Reassessment Proceedings:
The writ petition challenges the reassessment proceedings initiated under Section 148 of the Income-tax Act, 1961, for Assessment Year (AY) 2011-12 via notice dated 31.03.2018. The AO initiated these proceedings based on the belief that income chargeable to tax had escaped assessment.

Adequacy of Material and Information Furnished:
The petitioner/assessee argued that the AO did not furnish the material and information, such as the communication dated 12.03.2018 from the Income Tax Officer (Nahan) and an FIR and chargesheet filed by the Central Bureau of Investigation (CBI), which formed the basis for the reassessment. The AO provided the document containing the 'reason to believe' only after multiple requests and reminders. The petitioner/assessee highlighted that the AO's belief was based on "borrowed satisfaction" and lacked independent verification.

Validity of "Reason to Believe":
The petitioner/assessee contended that the facts recorded in the document containing 'reason to believe' did not have a nexus with AY 2011-12. The AO's observations included periods from Financial Year (FY) 2009-10, which were not relevant to the period in question. Additionally, the AO's reasoning appeared to be based on suspicion rather than tangible evidence, as evidenced by phrases like "may be in the guise of Share Capital, including Share Premium, bogus sales to M/s Para Impex Chem, or Long term loans or all."

The respondent/revenue argued that the reassessment proceedings were aligned with the provisions of Sections 147 and 148 of the Act and that the petitioner/assessee had received substantial amounts in its bank accounts, which warranted further investigation.

Analysis and Reasons:
The court observed that the AO failed to furnish the necessary material and information to the petitioner/assessee, which is a fundamental requirement. The AO's reliance on information concerning periods outside the relevant FY 2010-11 (AY 2011-12) and the lack of tangible evidence to form a belief that income had escaped assessment were significant issues. The court noted that the AO's approach was based on suspicion and conjecture, which is not sufficient to trigger reassessment proceedings.

Conclusion:
For the foregoing reasons, the court quashed the impugned notice issued under Section 148 of the Act. The writ petition was disposed of accordingly, with each party bearing their respective costs.

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