The Delhi bench of Income Tax Appellate Tribunal (ITAT) has held that assessment cannot be reopened merely on the basis of information by the investigation wing.

The bench of Vikas Awasthy (Judicial Member) and Naveen Chandra (Accountant Member) has observed that section 147 of the Income Tax Act mandates the Assessing Officer to record reasons to believe that any income chargeable to tax has escaped assessment. It is no more res intigra that borrowed satisfaction for reopening the assessment vitiates reassessment proceedings. 

Background

The CIT(A) has erred in quashing assessment merely on the ground that reasons recorded for reopening the assessment do not indicate independent application of mind by the Assessing Officer (AO). 

Though the initial information was received by the AO from the Additional Director of Investigation Wing, but the AO has also independently applied his mind and has recorded reasons to believe that income in the case of assessee has escaped assessment. 

The department sought to quash findings of the CIT(A) and uphold the validity of assessment proceedings.

Arguments

The department supported the findings of the AO in making disallowance of payments aggregating to Rs.28,00,32,120/- to M/s. Telestar Packaging P. Ltd., and M/s. Alishan Estates Pvt. Ltd.

The assessee contended that a bare perusal of reasons recorded for reopening would show that the AO has not independently applied his mind before recording the reasons for reopening. The assessment has been reopened merely on borrowed information. 

Conclusion

The tribunal held that a plain reading of the reasons recorded by the AO, unambiguously reflect that the AO has reopened the assessment based on the information received from the Investigation Wing of the Department. The “reasons to believe” are not of the AO. The assessment is liable to be quashed on this ground alone. There is no infirmity in the findings of the CIT(A) on this issue. 

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Case Details

Case Title: ACIT Versus M/s. Sahara Prime City Ltd.

Case No.: ITA No.1301/DEL/2017 (A.Y.2010-11)

Date: 08/11/2024

Counsel For Appellant: Ritu Sharma

Counsel For Respondent: Ajay Vohra