2014 (12) TMI 1168 - AT - Income Tax

Reopening of assessment - undisclosed receipt of ₹ 50 lakhs - Held that - During the course of hearing, a specific query was raised from the ld. D.R. as to what evidence they have collected during the course of search or thereafter, on the basis of which the Assessing Officer has formed a belief that the income chargeable to tax has escaped assessment in the hands of the assessee. No satisfactory answer was furnished by the ld. D.R. We have also carefully perused the seized documents and we find that there is a debit entry of ₹ 50 lakhs in the name of Mlik Kannauj, but this entry does not indicate that the amount of ₹ 50 lakhs was given to the Managing Director of the assessee. There may be hundred of Malik in Kannauj but on the basis of this dumb document, the reopening of assessment in the hands of the assessee is not permissible. Moreover, the searched party has also examined Shri. Sohanraj Gupta and the statement is also placed on record and at nowhere Shri. Sohanraj Gupta has deposed about payment of ₹ 50 lakhs to the assessee. In the absence of any relevant material, the reopening of assessment in the hands of the assessee is not proper. - Decided in favour of assessee

Summary

Issues:
1. Reopening of assessment based on seized documents and alleged unaccounted income.
2. Validity of the assessment order annulled by CIT(A).
3. Sufficiency of evidence linking the alleged income to the assessee.
4. Legality of the jurisdiction assumed by the Assessing Officer under section 147 of the Income-tax Act.

Analysis:
1. The appeal by the Revenue against the CIT(A)'s order involved the contention that the CIT(A) erred in allowing the appeal of the assessee based on incomplete inquiry regarding the identity of "Shri Malik of Kannauj." The Revenue claimed to possess material indicating that Shri Malik was indeed Shri Abdul Malik, MD of a specific company. The CIT(A) annulled the assessment order, prompting the Revenue's appeal.

2. The facts revealed that during a search, an entry of Rs. 50 lakhs in the name of "Malik Kannauj" was found, interpreted by the Revenue as payment to the assessee-company's MD. The Assessing Officer initiated reassessment under section 147, resulting in an addition to the income. The CIT(A) annulled this assessment due to lack of evidence tying the alleged income to the assessee.

3. The Tribunal scrutinized the seized documents and found the entry of Rs. 50 lakhs in the name of "Malik Kannauj" insufficient to link the payment to the assessee. Despite the Revenue's contentions, no concrete evidence was presented during the proceedings to support the reopening of the assessment. The CIT(A) rightly concluded that the reasons for reopening were based on irrelevant material, rendering the jurisdiction assumed by the Assessing Officer illegal.

4. The CIT(A)'s decision was upheld by the Tribunal, emphasizing the necessity of a direct nexus between the conclusion and primary facts. Citing legal precedent, the Tribunal dismissed the Revenue's appeal, confirming the annulment of the assessment order. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal, upholding the annulment of the assessment order due to lack of sufficient evidence linking the alleged income to the assessee.