2015 (11) TMI 128 - AT - Income Tax

Reopening of assessment - whether the Assessing Officer has reason to believe that any income chargeable to tax has eascaped assessment ? - Held that - The legal issue raised by the assessee is exactly similar to the case of assessee s sister concern i.e. Indo Arab Air Services vs. ACIT 2014 (7) TMI 291 - ITAT DELHI that the reason to believe made by the AO are self-contradictory and based only on suspicion. The ld. CIT(Appeals) has decided the issue only on the issue of change of opinion or sufficiency of reasons and not on the tenability and correctness of reasons and the AO s own contradictory reasons. The assessee has assailed the primary information itself being wrong, vague and bereft of any material. We find merit in the argument of ld. Counsel that the reason to believe as formed by the AO are not in terms as contemplated by section 147 and as mandated by the courts in the decisions referred to above. Respectfully following the above referred judgments by the Hon ble Supreme Court, i.e., Lakhmani Mewal Das 1976 (3) TMI 1 - SUPREME Court ; Ganga Saran & Sons P. Ltd. 1981 (4) TMI 5 - SUPREME Court , Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT OF INDIA and Sheo Nath Singh 1971 (8) TMI 6 - SUPREME Court we hold that the AO did not have valid reason to believe that impugned income had escaped assessment. Thereby, the reopening is quashed as bad in law. - Decided in favour of assessee.

Summary

Issues involved:
1. Reopening of assessment based on the "reason to believe" that income has escaped assessment for A.Y. 2002-03.

Detailed analysis:
The appellant filed an appeal against the order passed by the Commissioner of Income Tax for the assessment year 2002-03. During the hearing, the appellant's counsel pointed out a similar legal issue raised in the case of the appellant's sister concern before the ITAT Delhi 'C' Bench, which resulted in quashing the reopening of assessment. The appellant requested the same outcome based on the decision of the sister concern's case. The ITAT reviewed the findings of the Delhi 'C' Bench, emphasizing that the Assessing Officer (AO) must have a valid "reason to believe" that income has escaped assessment to invoke Section 147. The Supreme Court's judgments highlighted that the belief must not be arbitrary but based on relevant and material reasons. The AO's belief should be reasonable and not mere suspicion or vague information. The ITAT analyzed the information available to the AO from the Enforcement Directorate, noting discrepancies and lack of valid grounds for suspicion. The ITAT concluded that the AO's reasons were self-contradictory and solely based on suspicion, not meeting the standards set by the Supreme Court. Consequently, the ITAT quashed the reopening of assessment as legally flawed.

The ITAT's decision was influenced by the precedent set by the Delhi 'C' Bench in a similar case, where the legal issue and reasoning were analogous to the current appeal. Following the Delhi 'C' Bench's decision, the ITAT found that the AO lacked a valid reason to believe that income had escaped assessment in the appellant's case. Therefore, the ITAT allowed the appellant's appeal, dismissing the Revenue's appeal. The ITAT's decision was based on the legal principles established by the Supreme Court regarding the necessity of a valid and tangible basis for reopening assessments under Section 147. The ITAT's ruling focused on the inadequacy and lack of substance in the AO's reasons, emphasizing the importance of a reasoned belief supported by concrete information rather than mere suspicion.