2025 (2) TMI 1036 - AT - Income Tax

AO's vague three-line reasoning insufficient to reopen assessment under section 147 without specific details on escaped income

ITAT Kolkata quashed the reopening of assessment under section 147, finding that the AO's reasons for believing income escaped assessment were vague, ... Reopening of assessment u/s 147 - reasons to believe - AO noted that the assessee has failed to offer satisfactory explanation about the nature and source of credits into the Axis Bank account - assessee did not comply with the notice by filing the return of income HELD THAT:- As perused the reasons recorded for reopening of assessment u/s 148(2) AO after extracting the report of the investigation, simply recorded in three lines that I have reason to believe that assessee’s income chargeable to tax has escaped assessment, meaning thereby the AO has not recorded his satisfaction and reasons are vague, unambiguous and scanty. No details/information have been recorded as from whom the money was received and when it was received. In our opinion the re-assessment can be not be made on vague, scanty and ambiguous reasons recorded. As there is no satisfaction or independent application of mind by the ld. AO to the information received. Moreover, the reasons are vague, scanty and ambiguous. Therefore, we are inclined to quash the reopening of assessment. Consequently, the appeal of the assessee is allowed. The issues presented and considered in this legal judgment are as follows:1. Whether the reopening of assessment under section 147 of the Income Tax Act was valid for the assessment years 2009-10 and 2010-11.2. Whether the conditions precedent for assumption of jurisdiction under section 147 were fulfilled.3. Whether the income of the assessee chargeable to tax had escaped assessment.Issue-wise detailed analysis:1. The relevant legal framework and precedents:- Section 147 of the Income Tax Act allows for the reassessment of income if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment.- The decision in CIT vs. Insecticides (India) Ltd. (2013) 38 taxmann.com 403 (Delhi) was relied upon to argue against the validity of the reopening of assessment.2. Court's interpretation and reasoning:- The Assessing Officer reopened the assessment based on vague and scanty reasons without recording proper satisfaction or independent application of mind.- The reasons for reopening did not provide details on when and from whom the money was received, leading to a lack of clarity and specificity in the decision-making process.- The Tribunal found that the case fell under the ambit of borrowed satisfaction and non-application of mind, as per the decision in CIT vs. Insecticides (India) Ltd.3. Key evidence and findings:- The investigation wing provided information regarding the receipt of a significant amount in the assessee's bank account, the source of which was unclear.- Statements from various individuals indicated the involvement of the assessee in accommodation entries through companies controlled by another individual.- The total deposits made into bank accounts associated with the individual in question amounted to a substantial sum.4. Application of law to facts:- The Tribunal concluded that the reopening of the assessment was invalid due to the lack of proper reasoning and satisfaction by the Assessing Officer.- The Tribunal emphasized the importance of clear and specific reasons for reopening assessments under section 147 of the Income Tax Act.5. Treatment of competing arguments:- The assessee argued that the reopening was invalid, citing the lack of fulfillment of conditions precedent and the vague nature of the reasons recorded by the Assessing Officer.- The Revenue contended that the reopening was justified based on the information received from the investigation wing.Significant holdings:- The Tribunal quashed the reopening of assessment for both assessment years 2009-10 and 2010-11, finding the reasons provided by the Assessing Officer to be vague, scanty, and lacking independent application of mind.- The Tribunal allowed the appeals of the assessee on the grounds of the invalidity of the reopening of assessments.In conclusion, the Tribunal held that the reopening of assessments under section 147 of the Income Tax Act for the assessment years 2009-10 and 2010-11 was invalid due to the lack of proper reasoning and satisfaction by the Assessing Officer, as evidenced by the vague and ambiguous reasons provided. The appeals of the assessee were allowed based on this legal issue.