2016 (4) TMI 1141 - AT - Income Tax

Validity of reopening u/s 147 - Held that - The reasons to believe recorded by the Assessing Officer in the present case to initiate the proceedings under sec. 147 of the Act without application of her own mind on the information received were not as per the requirement of the provisions of the law laid down under sec. 147 of the Act, hence, the initiation of the proceedings was not valid and nor the assessment made in furtherance to the said initiation of the proceedings. The assessment framed under sec. 147 read with 143(3) of the Act in the present case in question is thus held as void-abinitio - Decided in favour of assessee

Summary

Issues Involved:
Validity of reopening u/s 147 of the Income Tax Act, 1961.

Comprehensive Analysis:

Issue 1: Validity of Reopening u/s 147:
The appellant contested the validity of the reopening u/s 147 of the Income Tax Act, 1961. The Assessing Officer (AO) initiated proceedings based on information regarding accommodation entries received by the appellant. The AO made additions to the income, which the appellant challenged before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) upheld the proceedings u/s 147, leading the appellant to file an appeal. The appellant argued that the issue was similar to a previous case adjudicated by ITAT Delhi Bench G, where the initiation of proceedings u/s 147 was deemed invalid. The High Court's decision emphasized the necessity for the AO to apply their mind to the material before forming a belief that income escaped assessment. The AO's reasons for reopening lacked this essential element, rendering the proceedings and subsequent assessment void ab initio. The tribunal ruled in favor of the appellant, quashing the assessment under sec. 147 read with 143(3) of the Act, citing the inadequacy of the AO's reasons for reopening.

Conclusion:
The tribunal allowed the appeal, declaring the initiation of proceedings u/s 147 invalid and quashing the assessment made thereafter. The judgment highlighted the importance of the AO applying their mind to the material before initiating proceedings under sec. 147 of the Act.