2015 (1) TMI 1364 - AT - Income Tax

Validity of reopening of assessment - reasons to believe - justification that the assessee purchased shares of other companies - Held that - Admittedly, there is no material on record to suggest that the assessee purchased and sold shares of Esasr Oil, Jai Corporation, etc. The figure of ₹ 4,18,437/- is not tallying with any material on record which amply prove that the AO had mechanically issued notice under section 148 of the Act. Similar mistake was committed by the CIT(A) by reproducing the grounds of appeal of some other assessee while passing the order, which amply shows that both the authorities below had not applied their minds to the facts of the case. Since the AO issued notice without proper recording of his satisfaction that he has reason to believe that income chargeable to tax had escaped assessment, it is of the firm view that reopening of assessment is bad in law - Decided in favour of assessee.

Summary

Issues: Jurisdiction of Assessing Officer in issuing notice under section 148 of the Act, Addition made by Assessing Officer, Confirmation of Assessing Officer's action by CIT(A)

Jurisdiction of Assessing Officer in issuing notice under section 148 of the Act:
The appeal challenged the order passed by the CIT(A)-27, Mumbai for the assessment year 2008-09. The Assessing Officer (AO) issued a notice under section 148 of the Act based on information obtained post a search action, alleging unexplained investments assessable under section 69 of the Act. The AO claimed the assessee obtained accommodation entries totaling a specific amount in the relevant year. The assessee objected, clarifying a single transaction through Alliance Intermediatories & Network Pvt. Ltd. The AO, however, assessed the unexplained investments from undisclosed sources, including shares of various companies, leading to the addition of the said amount to the assessee's income.

Addition made by Assessing Officer:
The CIT(A) upheld the AO's action, despite the assessee's submission of evidence like Balance Sheet, contract note, and D-Mat statement to disprove the addition. The CIT(A) failed to properly analyze the facts, leading to an order resembling a cut-and-paste job from another case. The assessee contended that the addition was not in line with the books of account, emphasizing that no evidence supported the AO's claim of undisclosed investments in multiple companies. The Tribunal noted the lack of material supporting the AO's assertion, concluding that the reopening of assessment lacked legal merit due to insufficient grounds and unsubstantiated claims.

Confirmation of Assessing Officer's action by CIT(A):
The Tribunal observed that the AO and CIT(A) had not applied their minds adequately to the case, with the CIT(A) even replicating grounds of appeal from a different case. The Tribunal emphasized the necessity for independent assessment and proper satisfaction by the AO before initiating reassessment proceedings. The lack of evidence supporting the alleged undisclosed investments in various companies led the Tribunal to rule in favor of the assessee, declaring the reopening of assessment as legally flawed and allowing the appeal.

This detailed analysis highlights the issues of jurisdiction in issuing notice under section 148, the addition made by the Assessing Officer, and the confirmation of the Assessing Officer's action by the CIT(A) in the context of the legal judgment delivered by the Tribunal.