2016 (2) TMI 997 - AT - Income Tax

Validity of reopening of assessment - Held that - A plain reading of the reasons recorded demonstrate that the A.O. has not applied his mind to the material/information received from the Director (Investigations). Without such independent application of mind, it is not possible for the A.O. to come to a conclusion that he has reason to believe that income assessable to tax has escaped assessment. Thus, respectfully following the propositions of law laid down by the Hon ble Delhi High Court in the case of Pr.CIT vs. G & G Pharma India Ltd. ( 2015 (10) TMI 754 - DELHI HIGH COURT ) we hold that the reopening is bad in law. - Decided in favour of assessee.

Summary

Issues:
1. Jurisdictional issue on reopening of assessment u/s 148 of the Act.

Analysis:
The appeal filed by the Revenue was directed against the order of the Ld. Commissioner of Income Tax (Appeals)-V dated 04.03.2010 concerning the Assessment Year (A.Y.) 2000-2001. The assessee, a company, had filed its return of income on 28.9.2000 declaring income of Rs. 3,96,115. The assessments were reopened under section 147 of the Act and completed under section 143(3) of the Act on 26.12.2007, determining the total taxable income at Rs. 68,96,120. The First Appellate Authority granted relief by deleting the addition made under section 68 of the Act. However, on the issue of reopening, the Ld.CIT(A) held against the assessee. Subsequently, the Revenue filed an appeal, and the assessee filed a Cross Objection on the issue of reopening.

The jurisdictional issue on the reopening of assessment under section 148 of the Act was thoroughly examined. The reasons recorded for issuing the notice for reopening indicated information received regarding beneficiaries and operators of accommodation entries, leading to the conclusion that the A.O. did not apply his mind independently to the material/information received from the Director (Investigations). The lack of such independent assessment prevents the A.O. from forming a valid reason to believe that taxable income had escaped assessment. Citing previous judgments, including one by the Hon'ble Delhi High Court, it was established that the basic requirement for reopening, i.e., the A.O. applying his mind to the materials, was not met in this case. Consequently, the reopening of the assessment was deemed invalid in law.

In conclusion, the Cross Objection of the assessee was allowed, and the Revenue's appeal was dismissed. The judgment highlighted the importance of the A.O. independently applying his mind to the received material before concluding that income had escaped assessment. This case serves as a reminder of the legal requirements for reopening assessments under section 148 of the Act, emphasizing the need for a valid reason to believe that income has indeed escaped assessment.