2015 (6) TMI 353 - AT - Income Tax

Reopening of assessment - validity of notice - reason to believe - Held that - Assessing Officer has issued the notice after recording reasons and there is no legal and procedural infirmity in issuing of notice. The assessee has never asked copy of the reasons recorded and in view of decision in the case of GKN Drive Shafts (India) Ltd. vs. ITO 2002 (11) TMI 7 - SUPREME Court we find no merits in the pleadings of the Ld. AR. Further, there is a direct decision of Hon ble Delhi High Court in the case of CIT vs. Safetag International India (P.) Ltd. 2011 (2) TMI 190 - Delhi High Court . The Assessing Officer is duty bound to supply the reasons recorded for reopening the assessment to the assessee, after the assessee files the return in response to the notice issued u/s 148 and on his making a request to the Assessing Officer to that effect. In the case under consideration, even the assessee has not made any request for supply of the reasons. - Decided against assesse. Validity of gifts - Held that - Since the assessee has submitted affidavits, copy of gift deeds and copy of ration cards which contain the particulars of the donor including addresses, details of family members which were sufficient to prove the identity of the person, in such a situation, we hold that assessee was able to discharge the primary onus and thereafter it is for the Assessing Officer to verify the veracity of these documents or issuing the summons u/s 131(2) to make the presence of the donors which he was miserably failed to do so - Decided against revenue.

Issues Involved:
1. Justification of reopening the assessment.
2. Timeliness of the reassessment notice.
3. Independent application of mind by the Assessing Officer in reopening the assessment.
4. Alleged escapement of income.
5. Establishment of the identity of the donors.
6. Addition of gift amounts to the assessee's income.

Issue-wise Detailed Analysis:

1. Justification of Reopening the Assessment:
The assessee challenged the reopening of the assessment, arguing that the Assessing Officer (AO) did not independently apply their mind and relied solely on information from the DIT (Investigation). The Tribunal held that the AO issued the notice after recording reasons, and there was no legal or procedural infirmity in doing so. The assessee did not request a copy of the reasons recorded, and as per the Supreme Court's decision in GKN Drive Shafts (India) Ltd. vs. ITO, the AO is not required to suo motu provide these reasons. The Tribunal found no merit in the assessee's arguments and upheld the validity of the reassessment notice.

2. Timeliness of the Reassessment Notice:
The assessee argued that the reassessment notice was served after the prescribed period had expired, rendering the reopening invalid. The Tribunal referenced the Delhi High Court's decision in CIT vs. Safetag International India (P.) Ltd., which clarified that the law does not mandate the AO to provide the reasons for reopening along with the notice. The Tribunal concluded that the notice was issued within the required timeframe, and the procedural requirements were met.

3. Independent Application of Mind by the Assessing Officer:
The assessee contended that the AO did not independently apply their mind before reopening the assessment. The Tribunal found that the AO had recorded the necessary reasons, which led them to believe that there was escapement of income. The Tribunal reiterated that the AO is not required to provide these reasons unless requested by the assessee. Since the assessee did not request the reasons, the Tribunal dismissed this ground of appeal.

4. Alleged Escapement of Income:
The assessee argued that no income had escaped assessment and that they had discharged their tax obligations. The Tribunal noted that the AO had recorded reasons for believing there was escapement of income and issued a valid notice under Section 148 of the Income Tax Act. The Tribunal upheld the AO's decision to reopen the assessment, finding no procedural or legal irregularities.

5. Establishment of the Identity of the Donors:
The assessee claimed to have established the identity of the donors by providing their addresses and identification. The Tribunal observed that the assessee had submitted confirmations, affidavits, gift deeds, ration cards, and income tax returns of the donors. The AO did not verify these documents or issue summons to the donors. The Tribunal held that the assessee had discharged their primary onus by providing these documents, and it was the AO's duty to verify their veracity. The Tribunal cited the Patna High Court's decision in Sarogi Credit Corporation vs. CIT, which stated that once the identity of the third party is established, the burden shifts to the department to disprove the assessee's claim.

6. Addition of Gift Amounts to the Assessee's Income:
The AO added the gift amounts to the assessee's income, questioning the genuineness of the gifts. The Tribunal found that the assessee had provided sufficient evidence to prove the identity of the donors and the genuineness of the gifts. The AO failed to take the investigation to its logical conclusion by not verifying the documents or issuing summons to the donors. The Tribunal concluded that the AO was not justified in rejecting the evidence submitted by the assessee and allowed this ground of appeal.

Conclusion:
The Tribunal dismissed the grounds related to the procedural and legal validity of the reassessment notice but allowed the grounds related to the merits of the addition. The appeal of the assessee was partly allowed, and the Tribunal directed the AO to verify the evidence provided by the assessee regarding the gifts received. The order was pronounced in open court on March 11, 2015.

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