2013 (10) TMI 1415 - AT - Income Tax

Reopening of assessment - Held that - AO was not justified in initiating the reopening proceedings in the present case merely on the basis of information received from the investigation wing of the department, without reference to any document or statement in absence of which, the information could not be regarded as a material or evidence that prime facie showed or established nexus or link which disclosed escapement of income. We thus while setting aside the orders of the authorities below in this regard hold that the notice issued u/s 148 of the Act in the present case was not as per the requirement of section 47 of the Act and is thus invalid. The assessment framed in furtherance to the said notice u/s 148 of the Act is thus quashed as null and void in consequence.

Summary

Issues involved:
1. Validity of notice issued under section 148 of the Income Tax Act.
2. Addition made on account of non-genuineness of the gift.

Issue 1: Validity of notice under section 148:
The appellant challenged the first appellate order on the grounds that the reassessment under section 148 lacked evidence or requisite satisfaction for jurisdiction. The appellant argued that the reassessment did not conform with section 148 provisions and established legal principles. The appellant contended that the Assessing Officer (AO) failed to discharge the onus to prove income escapement and made additions based on presumption and surmises without referencing evidence. The genuineness of the gift was supported by relevant documents disregarded on a general and arbitrary basis. The appellant questioned the validity of the notice issued under section 148 and the addition due to non-genuineness of the gift.

Analysis:
The appellant's representative argued that the AO initiated reopening proceedings solely based on information from the investigation wing without providing details or allowing cross-examination of the informant. The appellant cited legal precedents like Signature Hotels Pvt. Ltd. vs. ITO and CIT vs. Pradeep Kumar Gupta to support the argument that reopening cannot be solely based on such information. In contrast, the Departmental Representative (DR) defended the AO's actions, asserting that information from the investigation wing was sufficient to form a belief of income escapement. The DR relied on decisions like AGR Investment Ltd. vs. ACIT and Shalimar Buildcon (P) Ltd. vs. ITO to support this stance.

The appellant further contended that the decisions cited by the DR were not applicable due to distinguishable facts, emphasizing the sufficiency of belief and lack of independent application of mind by the AO. Upon reviewing the reasons recorded for initiating reopening proceedings, it was found that the AO relied solely on information received without substantial evidence. Citing the case of Signature Hotels Pvt. Ltd. vs. ITO, it was established that the reasons provided did not meet the requirements of section 147, lacking reference to documents or statements to establish income escapement. Consequently, the AO's actions were deemed unjustified, and the notice issued under section 148 was held invalid, leading to the quashing of the assessment.

Issue 2: Addition on account of non-genuineness of the gift:
The appellant raised concerns regarding the addition made on the grounds of the gift's non-genuineness. However, due to the invalidity of the notice under section 148, the assessment order was declared null and void, rendering the question of the addition's merits unnecessary for adjudication.

In conclusion, the appellate tribunal ruled in favor of the appellant, setting aside the orders of the authorities below, declaring the notice under section 148 invalid, and quashing the assessment. The appeal was allowed, and the assessment order was pronounced null and void on the basis of the notice's invalidity.