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2018 (6) TMI 884 - AT - Income TaxValidity of re-opening the assessment u/s 147 - non independent application of mind by AO - reopening on borrowed knowledge - Held that - The facts are similar to the facts before judgement of Hon ble Delhi High Court in Signature Hotels Pvt. Ltd. Vs. ITO 2011 (7) TMI 361 - DELHI HIGH COURT where it is held that there is no reference to the document or statement except the letter of the Investigation Wing, which has been quoted in the reasons. The Annexure also does not show prima facie or establishes nexus for link which discloses escapement of income. AO did not apply his own mind to the information and examined the basis and material or the information - hence following the decision of the Hon ble Delhi High Court, we also hold that re-opening in this case also does not satisfy provisions of section 147 - also CIT(A) has held that assessee has not filed any return of income. However, when we look at the assessment order, the addition made by the AO is to the original returned income of ₹ 1,52,100/-. Therefore, this finding of the learned CIT(A) is not in conformity with the records - hence the assessment order passed by the AO holding that re-opening u/s 147 is not valid - Decided in favor of assessee.
Issues Involved:
1. Validity of assessment order under section 143(3) read with section 147 of the Income Tax Act. 2. Use of borrowed information without independent satisfaction by the Assessing Officer. 3. Legality of invoking section 147 without material evidence. 4. Mechanical approval by the Addl. CIT under section 151. 5. Consideration of the assessee's affidavit denying payment of donation/capitation fee. 6. Non-examination of college authorities under section 131. 7. Non-confrontation of seized documents to the assessee. 8. Use of photocopies of purported evidence without confirming authenticity. 9. Jurisdiction of the Assessing Officer. 10. Initiation of penalty proceedings under section 271(1)(c). 11. Charging of interest under section 234B. Detailed Analysis: 1. Validity of Assessment Order under Section 143(3) read with Section 147: The assessee contended that the assessment order passed under section 143(3) read with section 147 was invalid as it was based on borrowed information without independent application of mind by the Assessing Officer. The tribunal found that the reopening of the assessment was not valid as the Assessing Officer did not apply his own mind to the information received from the Investigation Wing. The tribunal relied on the decision of the Hon’ble Delhi High Court in Signature Hotels Pvt. Ltd. Vs. ITO, which held that mere reference to the information received from the Investigation Wing without independent examination does not satisfy the requirements of section 147. 2. Use of Borrowed Information without Independent Satisfaction: The tribunal observed that the reasons recorded by the Assessing Officer for reopening the assessment were solely based on the information received from the Deputy Director of Income Tax (Investigation). The tribunal emphasized that the Assessing Officer must have his own reason to believe that income has escaped assessment, which was not the case here. The tribunal noted that the Assessing Officer did not conduct any independent enquiry or verification before recording the reasons for reopening. 3. Legality of Invoking Section 147 without Material Evidence: The assessee argued that the Assessing Officer did not possess any material evidence to confirm the payment of ?55 lakhs as donation/capitation fee. The tribunal found that there was no direct evidence to support the claim that the assessee paid ?55 lakhs in cash. The tribunal noted that the addition was made based on the statement of Dr. P. Mahalingam and a chart showing the name of the assessee’s son, but no corroborative evidence was provided. 4. Mechanical Approval by the Addl. CIT under Section 151: The tribunal observed that the approval for reopening the assessment was given mechanically by the Addl. CIT, who merely mentioned “Yes” without providing any reasoning. The tribunal referred to the decision of the Hon’ble M.P. High Court in CIT Vs. S. Goyanka Lime and Chemical Ltd., which held that mechanical approval without reasoning is invalid. The tribunal found that the approval in this case did not meet the legal requirements. 5. Consideration of the Assessee's Affidavit Denying Payment of Donation/Capitation Fee: The assessee submitted an affidavit denying the payment of ?55 lakhs as donation/capitation fee. The tribunal noted that the Assessing Officer did not consider the affidavit and did not provide any evidence to rebut the affidavit. The tribunal found that the failure to consider the affidavit rendered the assessment order invalid. 6. Non-examination of College Authorities under Section 131: The tribunal observed that the Assessing Officer did not examine the college authorities under section 131 to verify the claim of payment of donation/capitation fee. The tribunal found that the failure to examine the college authorities and to provide an opportunity for cross-examination to the assessee was a significant lapse in the assessment proceedings. 7. Non-confrontation of Seized Documents to the Assessee: The tribunal noted that the copies of the seized documents, which were purported to show the payment of ?55 lakhs, were not confronted to the assessee for rebuttal. The tribunal found that the non-confrontation of the seized documents violated the principles of natural justice and rendered the assessment order invalid. 8. Use of Photocopies of Purported Evidence without Confirming Authenticity: The tribunal observed that the addition was made based on photocopies of purported evidence received from the Investigation Wing without confirming their authenticity. The tribunal found that relying on unverified photocopies without corroborative evidence was not legally tenable. 9. Jurisdiction of the Assessing Officer: The assessee challenged the jurisdiction of the Assessing Officer to decide the case. The tribunal did not specifically address this issue in detail, but the overall finding that the reopening was invalid implies that the jurisdictional challenge was also upheld. 10. Initiation of Penalty Proceedings under Section 271(1)(c): The tribunal did not specifically address the initiation of penalty proceedings under section 271(1)(c) in detail, but the overall finding that the assessment order was invalid implies that the penalty proceedings were also not tenable. 11. Charging of Interest under Section 234B: The tribunal did not specifically address the issue of charging interest under section 234B in detail, but the overall finding that the assessment order was invalid implies that the charging of interest was also not tenable. Conclusion: The tribunal allowed the appeal of the assessee, holding that the reopening of the assessment under section 147 was not valid. The tribunal set aside the assessment order, finding that the Assessing Officer did not apply his own mind, relied on borrowed information, and failed to provide corroborative evidence. The tribunal also found that the approval for reopening was given mechanically and that the principles of natural justice were violated. The tribunal's decision was based on the legal principles established by the Hon’ble Delhi High Court and the Hon’ble M.P. High Court.
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