TaxTMI 
TaxTMI 
2024 (2) TMI 108
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....plied with. 3. On the facts and circumstances of the case, Id. CIT(A) has erred both on facts and in law in confirming the order despite the fact that the initiation of the proceedings under Section 147, read with Section 148, made by A.O. is bad and liable to be quashed as the reasons on the basis of which the reassessment is initiated has no live link between the material and the belief formed. 4. (i) On the. facts and circumstances of the case, Id. CIT(A) has erred both on facts and in law in confirming the order of the A.O. despite the same having been made on the basis of reasons recorded without there being any independent application of mind on the part of the Assessing Officer. (ii) That the reassessment order passed by the A.O. is bad and liable to be quashed as the same has been reopened on the basis of the reasons which are vague and has been recorded only on borrowed satisfaction. 5. On the fact and circumstances of the case, Id. CIT(A) has erred both on facts and in law in confirming the order despite the fact that the reopening u/s 147 of the income tax Act, 1961 is bad in law having been made without obtaining valid approval from the prescribed authority as r....
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.... his ground nos. 2 to 6 challenged the reopening of assessment u/s 148 of the Act as bad in law. 4. Ld. Counsel for the assessee referring to page 4 of the Paper Book which are the reasons recorded for issue of notice u/s 148 of the Act submitted that the assessment was proposed to reopen on the ground that no return of income has been filed by the assessee for the year under consideration when in fact the assessee had filed return of income on 31.03.2010 declaring taxable income of Rs. 1,96,190/-. Ld. Counsel submits that the assessment was reopened based on an information received from DDIT vide letter dated 21.03.2016, wherein it has been stated that assessee has invested more than 15 crores in construction of house in Rohtak. Ld. Counsel submits that these are two reasons recorded for ratio of notice u/s 148 for reopening of the assessment of the assessee. Ld. Counsel submits that there are factual inconsistencies in the reasons recorded u/s 148 in as much as it is stated in the reasons that no return has been filed which is contrary to record as the assessee in fact filed return of income. Ld. Counsel further submitted that in the reasons recorded it is stated that informatio....
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.... Rohtak. 7. Heard rival submissions, perused the orders of the authorities below. In this case, the assessment was reopened by issue of notice u/s 148 of the Act. The reasons for reopening the assessment are as under: 8. As could be seen from the reasons recorded the Assessing Officer proposed to reopen the assessment based on the information received from DDIT(Inv.) that assessee has invested more than 15 crores in construction of house property. Secondly, the assessee has not filed return of income for the AY 2009-10 based on these reasons the AO has reason to believe that the income more than 15 crores which is chargeable to tax has escaped assessment for the AY 2009-10. 9. On careful perusal of the reasons, we noticed that the statement in the reasons that assessee had not filed return of income for the AY 2009-10 is factually incorrect, as the assessee filed return of income on 31.10.2010 declaring taxable income of Rs. 1,96,190/-. The AO is of the belief that income of more than 15 crores has escaped assessment based on an information of DDIT(Inv.) that the assessee had invested more than 15 crores in construction of house in Rohtak. In the reasons recorded the AO has not ....
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....essment order dated 30th December, 2011 passed consequent upon the reopening of the assessment, the very first line states that "the Assessee had filed return declaring income of Rs. 4,38,958/- on 31/10/2004 which was processed under Section 143(1) of the Act on 04.01.2005." 6. The second glaring error in the reasons was that the total of the accommodation entries was set out as Rs. 1.56 crore. In the same assessment order dated 30th December 2011 in para 2.3 it is stated as under: "2.3 It is pertinent to mention here that in the reasons recorded there was some clerical error as certain single transactions were appearing in multiple and this resulted in working of the escaped income to the extent of Rs. 1,56,00,000/-. However, the same has now been considered and stands corrected for the purposes of completion of proceedings." 7. In para 3.1 of the above assessment order, the AO has set out the information received from the Investigation Wing regarding the alleged bogus accommodation entries pertaining to 16 entities which sum in the aggregate works out to Rs. 78 lakhs. 8. Mr. Ruchir Bhatia, learned Senior Standing Counsel for the Revenue, relied on the decisions in Income-....
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....erseas Pvt. Ltd.), this Court discussed the legal position regarding reopening of assessments where the return filed at the initial stage was processed under Section 143(1) of the Act and not under Section 143(3) of the Act. The reasons for the reopening of the assessment in that case were more or less similar to the reasons in the present case, viz., information was received from the Investigation Wing regarding accommodation entries provided by a 'known1 accommodation entry provider. There, on facts, the Court came to the conclusion that the reasons were, in fact, in the form of conclusions "one after the other" and that the satisfaction arrived at by the AO was a "borrowed satisfaction" and at best "a reproduction of the conclusion in the investigation report." 13. As in the above case, even in the present case, the Court is unable to discern the link between the tangible material and the formation of the reasons to believe that income had escaped assessment. In the present case too, the information received from the Investigation Wing cannot be said to be tangible material per se without a further inquiry being undertaken by the AO. In the present case the AO deprived him....
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....s already filed, then, such reassessment proceedings are not in accordance with the law and have to be quashed. For this proposition, we rely on the decision of the Hon'ble Delhi High Court in the case of PCIT vs. RMG Polyvinyal (I) Ltd. (supra), and the decision of the Hon'ble Gujarat High Court in the case of Vijay Haishchandra Patel vs. ITO (supra) relied on by the Id. Counsel for the assessee. The various other decisions relied on by the Id. Counsel on this issue also support his case to the proposition that when reopening was based on the premise that the assessee has not filed his return of income as per database of the Department, but, the assessee has actually filed the return of income, then, such reopening is not in accordance with the law and has to be quashed since such reopening was based on wrong facts. We, therefore, quash the reassessment proceedings initiated by the AO and subsequent proceedings are accordingly quashed. Since the assessee succeeds on this legal ground, the various other grounds challenging the reopening of the assessment as well as addition on merit become academic in nature and, therefore, are not being adjudicated." 12. The ratio of this decisio....
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....ation of mind by the A.O. to the AIR information and that the A.O. recorded incorrect facts in the reasons for reopening of the assessment. Since the A.O. did not apply his independent mind to the AIR information received which was also incorrect, therefore, the very basic requirement for reopening of the assessment is not satisfied. In the instant case, the crucial link between the information made available to the A.O. and the formation of belief was absent. The reasons to believe recorded were incorrect and mere conclusion of the A.O. based on incorrect and non-existing facts. There were no basis to record reasons for reopening of the assessment. The reasons recorded failed to demonstrate the link between the tangible material and the formation of the reason to believe that income chargeable to tax has escaped assessment. The A.O. had not independently considered and verified the AIR information which formed the basis for the reasons to believe that income chargeable to tax has escaped assessment. Therefore, on this reason alone, the reopening of the assessment is illegal and bad in law. We rely upon the decision of Hon'ble Delhi High Court in the case of Pr. CIT vs. GANDG P....
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....d of adding a sum of Rs. 78 lakhs, even going by the reasons for reopening of the assessment, added a sum of Rs. 1.13 crores and the basis for such addition had not been explained. No error was committed by the Appellate Tribunal in holding that reopening of the assessment under section 147 was bad in law. No question of law arose." 7.3. The Hon'ble Gujarat High Court in the case of Vijay Harishchandra Patel vs. ITO (2018) 4 (Guj.) (HC) held as under: "Held, allowing the petition, that the very basis for reopening of the assessment was unjustified and the assumption of jurisdiction under section 147 by the Assessing Officer by issuing a notice under section 148 was without authority of law and could not be sustained. The Assessing Officer had sought to reopen the assessment to once again examine the very aspect which had been gone into by his predecessor-Assessing Officer in the first round of proceedings under section 147. When an Assessing Officer had applied his mind to an issue in the assessment proceedings, the successor- Assessing Officer could not have sought to reopen the proceedings on the same ground as it amounted to a mere change of opinion. In the reasons recor....
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....ssee has not fully disclosed his income and income to the extent of Rs. 28,83,000/- has escaped assessment, these are the only reasons recorded for reopening of assessment of the assessee. However, on perusal of the copy of acknowledgement of return of income filed by the assessee which is placed at page 8 of the paper book, it is clear that the assessee has filed his return of income on 30.07.2011 declaring income of Rs. 1,53,660/- vide acknowledgement no. 3001000609. This fact was also recorded in the ITS dated 10.03.2018 which is very much available with the AO when the reasons were recorded and notice was issued u/s 148 dated 31.03.2018. Therefore, it is abundantly clear that based on wrong assumption of facts the AO believed that the income of the assessee had escaped assessment. Firstly as per AIR information AO was of the view that there is a deposit of Rs. 28,83,000/- in ICICI bank which is factually wrong since there were deposits in two bank accounts one is ICICI and the other is HDFC Bank. Secondly, the assessee even though filed return of income the AO records that no return was filed by the assessee and, therefore, income had escaped assessment. It is also observed tha....
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....ns for reopening of assessment and issue of notice u/s 148. Therefore, without going to the contents of the entries in the bank accounts merely deposits cannot be treated as income escaping assessment. 14. On going through the reasons recorded by the AO, I find that there is no nexus between the prima facie inferences arrived in the reasons recorded and the information. The information was restricted to cash deposit in bank account but there was no material much less tangible, cogent, credible and relevant material to form a reason to believe that cash deposits represented income of the assessee. The reasons recorded in the present case at best can be treated to be reasons to suspect which is not sufficient for reopening the assessment u/s 148 of the Act. The requirement of application of mind is missing in the present ease on the face of it in the reasons recorded. 15. In the case of PCIT vs. Meenakshi Overseas Pvt. Ltd. (supra) it has been held that if there was no independent applicable of mind by AO to tangible material and reasons, failed to demonstrate link between tangible material and formation of reason to believe that income had escaped assessment and, therefore, reas....