2011 (6) TMI 917 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the reopening u/s 147/148 of the Income Tax Act, 1961.
2. Confirmation of additions and disallowances by the CIT(A).

Summary:

1. Validity of the reopening u/s 147/148 of the Income Tax Act, 1961:

The assessee challenged the validity of the reopening u/s 147/148 of the Income Tax Act, 1961, on the grounds that the reassessment proceedings were initiated while the original return was still pending, and the reasons recorded by the A.O. were without application of mind. The A.O. issued a notice u/s 148 based on information from the Vigilance Department, which indicated that the assessee had made significant investments. The CIT(A) upheld the reopening, citing that there was relevant material for the A.O. to form a belief of income escapement.

The Tribunal found that the reasons recorded by the A.O. were mere information from the Vigilance Department and were undated, indicating non-application of mind. The A.O. incorrectly stated that no return of income was filed, despite the assessee having filed a return on 1-11-2004. The Tribunal concluded that the A.O. did not independently verify the information or form a belief of income escapement, relying solely on the Vigilance Department's report. Citing the Hon'ble Delhi High Court's decision in C.I.T. Vs. SFIL Stock Broking Ltd. (2010) 325 ITR 285 (Delhi), the Tribunal quashed the reassessment order due to the A.O.'s failure to apply his mind and independently arrive at a belief of income escapement.

2. Confirmation of additions and disallowances by the CIT(A):

Since the reassessment order was quashed, the Tribunal did not find it necessary to decide on the merits of the grounds of appeal raised by the assessee regarding the confirmation of additions and disallowances by the CIT(A).

Conclusion:

The appeal was allowed, and the reassessment order dated 29-12-2006 was quashed. The order was pronounced in the Open Court on 6th June, 2011.