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2016 (8) TMI 1547 - AT - Income TaxReopening of assessment u/s 147 - application v/s non application of mind by AO - Reopening on basis of information allegedly received by him from the Directorate of Income Tax (Investigation) - HELD THAT - AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. In our view the reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law. The AO has mechanically issued notice u/s. 148 of the Act on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation) New Delhi As issue involved in the present appeal and is squarely covered by the aforesaid decisions of the Hon ble High Court of Delhi in the case of G G Pharma 2015 (10) TMI 754 - DELHI HIGH COURT Signatures Hotels (P) Ltd. 2011 (7) TMI 361 - DELHI HIGH COURT Hence we decide the legal issue in dispute in favor of the Assessee and against the Revenue and accordingly quash the reassessment proceedings and allow the ground no. 1 2 raised by the Assessee.
Issues Involved:
1. Validity of jurisdiction assumed by the AO under sections 147, 148, and 151 of the Income Tax Act, 1961. 2. Validity of the assessment order without serving mandatory notices under sections 148 and 143(2) of the Income Tax Act, 1961. 3. Legitimacy of additions made by the AO regarding alleged commission received and accommodation entries. 4. Legitimacy of treating the assessee's business as bogus and in the nature of accommodation entry. 5. Imposition of interest under section 234B of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Validity of jurisdiction assumed by the AO under sections 147, 148, and 151 of the Income Tax Act, 1961: The Assessee contended that the AO erred in assuming jurisdiction under section 147 without complying with the mandatory conditions prescribed under sections 147 to 151. The Tribunal noted that the reasons recorded by the AO for reopening the case were vague and not based on any tangible material. The AO had mechanically issued the notice under section 148 based on information from the Directorate of Income Tax (Investigation), without independent application of mind. The Tribunal referenced the Delhi High Court’s decision in Pr. CIT vs. G&G Pharma India Ltd., which emphasized that the AO must apply his mind to the materials to form a reason to believe that income has escaped assessment. The Tribunal concluded that the reopening was bad in law and deserved to be quashed. 2. Validity of the assessment order without serving mandatory notices under sections 148 and 143(2) of the Income Tax Act, 1961: The Assessee argued that the AO framed the assessment order without serving mandatory notices under sections 148 and 143(2). The Tribunal, focusing on the procedural lapses, found that the AO did not follow the due process of law, which further invalidated the reassessment proceedings. 3. Legitimacy of additions made by the AO regarding alleged commission received and accommodation entries: The Assessee challenged the additions of ?36,35,140/- and ?29,43,644/- made by the AO on the grounds of alleged commission received and providing intermediate accommodation entries. The Tribunal did not delve into the merits of these additions, as it had already quashed the reassessment proceedings on jurisdictional grounds. 4. Legitimacy of treating the assessee's business as bogus and in the nature of accommodation entry: The AO treated the assessee's business as bogus and in the nature of accommodation entry without confronting any adverse material or providing an opportunity of hearing. The Tribunal, having quashed the reassessment proceedings, did not specifically address this issue but implied that such treatment was not justified without proper evidence and procedure. 5. Imposition of interest under section 234B of the Income Tax Act, 1961: The Assessee contested the imposition of interest under section 234B. The Tribunal did not address this issue separately, as the reassessment proceedings themselves were quashed, rendering the imposition of interest moot. Conclusion: The Tribunal allowed the Assessee’s appeal, quashing the reassessment proceedings due to the AO's failure to apply independent judgment and follow mandatory procedures under sections 147, 148, and 151. Consequently, the other grounds raised by the Assessee were not addressed, as the primary issue of jurisdictional validity was decided in favor of the Assessee.
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