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2017 (4) TMI 820 - AT - Income TaxValidity of reopening of assessment - information received from the Addl. Directorate of Income Tax (Investigation) as relied upon - 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 Addl. Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. - Decided in favour of assessee.
Issues Involved:
1. Sustaining the addition of ?20,00,000/- representing the share capital by invoking the provisions of Section 68. 2. Sustaining the addition of ?50,000/- being a hypothetical figure (Commission) @4% of the share capital. 3. Lack of proper opportunity of being heard provided by the AO. 4. Arbitrary, illegal, and bad in law appellate order. 5. Admission of additional grounds of appeal regarding the applicability of Section 147/148. Detailed Analysis: Issue 1: Sustaining the addition of ?20,00,000/- representing the share capital by invoking the provisions of Section 68 The assessee contended that the addition of ?20,00,000/- was erroneously sustained under Section 68. The Tribunal examined the reasons recorded by the Assessing Officer (AO) for reopening the assessment. It was found that the AO did not apply his mind independently and relied on vague information from the Investigation Wing. The Tribunal noted that the reasons were not based on tangible material and lacked the necessary ingredients to justify the addition. Consequently, the Tribunal quashed the reassessment proceedings, deeming them bad in law. Issue 2: Sustaining the addition of ?50,000/- being a hypothetical figure (Commission) @4% of the share capital The Tribunal did not specifically address this issue separately as it became academic in nature after quashing the reassessment proceedings. The primary focus was on the legality of the reassessment itself. Issue 3: Lack of proper opportunity of being heard provided by the AO The assessee argued that no proper opportunity was given to present their case. The Tribunal noted that the reassessment proceedings were initiated based on borrowed satisfaction without independent verification by the AO. This procedural lapse contributed to the decision to quash the reassessment. Issue 4: Arbitrary, illegal, and bad in law appellate order The Tribunal found the appellate order to be arbitrary and not in accordance with the principles of contemporary jurisprudence. The reassessment was based on vague and non-specific information, leading to the conclusion that the order was bad in law. Issue 5: Admission of additional grounds of appeal regarding the applicability of Section 147/148 The Tribunal admitted the additional grounds of appeal, emphasizing that they were purely legal and did not require fresh investigation of facts. The Tribunal referred to the Supreme Court decision in the case of NTPC Limited, which allowed raising legal grounds at any stage. The Tribunal found that the AO had mechanically issued the notice under Section 148 without proper application of mind, relying solely on information from the Investigation Wing. The Tribunal cited several judgments, including those from the Delhi High Court, supporting the view that the reassessment proceedings were invalid due to lack of independent satisfaction by the AO. Conclusion: The Tribunal quashed the reassessment proceedings, deeming them bad in law due to the AO's failure to independently verify the information and apply his mind. The additional grounds of appeal were admitted, and the reassessment was found to be based on vague and non-specific information, making the appellate order arbitrary and illegal. The assessee's appeal was allowed, and the reassessment proceedings were quashed.
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