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2018 (9) TMI 2098 - AT - Income TaxInitiation of proceedings u/s 147 and issue of notice u/s 148 - Information received from the CBDT that the assessee had filed a declaration under VDIS-1997 - HELD THAT;- As the reasons recorded by the AO only speak all the information received from the CBDT regarding the alleged declaration by the assessee. The reasons were supplied to the assessee on 20.03.2006. No such alleged declaration was, however, provided to the assessee. In the first round, in his remand report (APB-36) dated 2.10.2006, the AO expressed before the CIT(A) that the VDIS-1997 disclosure was needed in original, in order to verify such disclosure. The CIT(A), however, did not take any further steps in this regard. It was only when the Tribunal, vide order remanded the matter to the AO, directing him to supply the alleged VDIS declaration to the assessee, that the alleged documents, i.e., VDIS form, assessee s affidavit, report of valuation of jewellery in the assessee s name and copy of account for the disclosure made under VDIS 1997, saw, much belatedly, the light of day and were supplied to the assessee only on 18.02.2014, in stark contravention of the Tribunal s direction that if within three months of receipt of the Tribunal order dated 11.04.2012, the AO was not able to supply to the assessee, the VDIS declaration, he would drop the reassessment proceedings. All this material, as such, has not been shown to have been in the possession of the AO at the time of recording of the reasons to believe escapement of income. In para 4 of the original assessment order dated 30.03.2006, the AO stated that the reasons were recorded on the basis of the information, as above, received from the CBDT, that the assessee s contention that she had not declared any income in VDIS 1997, did not appear to be correct and that the total income was being assessed, believing the information sent by the CBDT. Hence, even as per the AO himself, none of the documents referred to by the CIT(A), i.e., the VDIS form, the assessee s affidavit, the report of the valuation of the jewellery in the assessee s name and the copy of account for the disallowance made under VDIS 1997, was in the possession of the AO at the time of the recording of the reasons. AO based the reopening merely on the bare information received by him from the CBDT that the assessee had filed a declaration under the VDIS 1997, in which, he (sic-she) had declared an amount of Rs.10,02,948/- on 31.12.1997, but had not paid the tax thereon and the Certificate was not issued to him (sic-her). It was this bald so called information, which was reproduced by the AO in the reasons recorded and he, without any further inquiry thereon, i.e., without any independent application of his own mind to it, formed his alleged reason to believe escapement of income. The reopening is, thus liable to be set aside and reversed on this score alone. We hold so. The reopening of the assessee s completed assessment is cancelled on this count itself. As for the alleged VDIS declaration attributed to the assessee, the mere information, which was the only material available with the AO at the relevant time, such declaration has been held to be that of the assessee. The basis for the CIT(A) to hold so is that the assessee s signature thereon is exactly the same as that on the assessee s statement given before the ITO in 2006. Thus as cancelled the reopening of the assessment on the ground of it having been initiated merely on the bare information received from the CBDT, without any application of mind by the AO, any decision on this issue becomes otiose, as it, or anything else, no-longer survives. Assessee appeal is allowed.
Issues Involved:
1. Initiation of proceedings under Section 147 and issuance of notice under Section 148. 2. Assessment completed beyond the time limit. 3. Addition of Rs.10,02,950/- as income from undisclosed sources. 4. Charging of interest under Sections 234A and 234B. Issue-wise Detailed Analysis: 1. Initiation of proceedings under Section 147 and issuance of notice under Section 148: The assessee contended that the initiation of proceedings under Section 147 and the issuance of notice under Section 148 were based on information from the CBDT without any documents to substantiate the belief that income had escaped assessment. The Assessing Officer (AO) did not have any documents even until the completion of reassessment proceedings. The Tribunal noted that the AO reopened the assessment based on information from the CBDT about a declaration under VDIS-1997. However, the AO did not independently verify this information and relied solely on the CBDT's information. The Tribunal held that the reopening of the assessment was invalid as it was based on borrowed satisfaction and lacked independent application of the AO's mind. Consequently, the reopening of the assessee's completed assessment was canceled. 2. Assessment completed beyond the time limit: The assessee argued that the assessment order passed under Section 143(3)/254 was beyond the time period specified by the ITAT. The Tribunal observed that the AO was directed to supply a copy of the VDIS-1997 declaration within three months from the receipt of the Tribunal's order dated 11.04.2012. However, the AO supplied the documents only on 18.02.2014, well beyond the stipulated time. The Tribunal noted that the AO's failure to comply with the time limit rendered the reassessment proceedings invalid. The Tribunal dismissed the Department's application for an extension of time, emphasizing that the Tribunal has no power to review its order passed on merit. 3. Addition of Rs.10,02,950/- as income from undisclosed sources: The assessee challenged the addition of Rs.10,02,950/- as income from undisclosed sources, arguing that she had not filed any declaration under VDIS-1997. The AO based the addition on the alleged VDIS declaration, which the assessee denied. The Tribunal observed that the AO and CIT(A) concluded that the signatures on the VDIS declaration matched those on other documents without referring the matter to a handwriting expert. The Tribunal held that this approach was unsustainable in law and that the correct course was to refer the matter to a handwriting expert. However, since the reopening of the assessment was canceled, the issue of the addition became otiose. 4. Charging of interest under Sections 234A and 234B: The assessee raised an additional ground challenging the charging of interest under Sections 234A and 234B. The Tribunal admitted this additional ground, noting that it related to a legal issue requiring no fresh material. The Tribunal did not specifically address this issue in detail, as the primary focus was on the validity of the reopening of the assessment and the addition of income. Conclusion: The Tribunal allowed the appeal, canceling the reopening of the assessment on the grounds that it was based on borrowed satisfaction without independent application of the AO's mind. The Tribunal also noted procedural lapses, including the failure to comply with the time limit for supplying the VDIS declaration. Consequently, the addition of Rs.10,02,950/- as income from undisclosed sources was rendered moot, and the appeal was allowed in favor of the assessee.
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