2018 (10) TMI 183 - AT - Income Tax

Reopening of the assessment u/s 147/148 - Reasons to believe - Held that - Assessing Officer referred to the information and the two directions as reasons on the basis of which he was proceeding to issue notice under Section 148. We are afraid that these cannot be the reasons for proceeding under Section 147/148. The first part is only an information and the second and the third parts of the beginning paragraph of the so-called reasons are mere directions. From the so-called reasons it is not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that on the basis of the material which he had before him income had escaped assessment. Tribunal has arrived at the correct conclusion on facts. The law is well settled. There is no substantial question of law which arises for our consideration - reopening of the assessment is without any application of mind and examination of the facts - Decided in favour of assessee.

Issues Involved:
1. Reopening of assessment under Section 147/148 of the Income Tax Act.
2. Validity of the reasons for reopening the assessment.
3. Application of mind by the Assessing Officer (AO) in forming the belief that income has escaped assessment.
4. Borrowed satisfaction and lack of independent application of mind by the AO.
5. Distinguishing facts from the cited High Court decision.

Detailed Analysis:

Reopening of Assessment under Section 147/148 of the Income Tax Act:
The primary issue in both appeals was the reopening of the assessment under Sections 147 and 148 of the Income Tax Act. The appellants contended that the reopening was "bad in law" due to lack of proper reasons and application of mind by the Assessing Officer (AO).

Validity of the Reasons for Reopening the Assessment:
The reasons for reopening the assessment were based on information received from the Chief Commissioner of Income Tax, indicating that the appellants had received accommodation entries in the form of bogus purchases from certain individuals. The Tribunal found that the reasons for reopening the assessment were identical to those considered in the appeal of Rajender Parsad, where the reopening had been quashed.

Application of Mind by the Assessing Officer:
The Tribunal observed that the AO's reasons for reopening the assessment were borrowed from another case without any independent verification or application of mind. The AO had relied on information from the investigation wing and other authorities without examining the material himself. This lack of independent application of mind made the reopening invalid.

Borrowed Satisfaction and Lack of Independent Application of Mind:
The Tribunal emphasized that the AO's reasons were based on borrowed satisfaction from other cases and did not reflect his own independent belief. The AO had also contradicted himself by stating that no return of income was filed by the appellant, whereas the assessment order mentioned that a return was filed on 18.10.2007. This contradiction further indicated a lack of application of mind.

Distinguishing Facts from the Cited High Court Decision:
The Tribunal noted that the decision of the Hon’ble Delhi High Court cited by the Departmental Representative (DR) was in a different context. In the present case, the reopening was based on a search at a third party's premises, and the assessment was reopened without proper application of mind. Therefore, the facts of the present appeals were distinguishable from the cited High Court decision.

Conclusion:
The Tribunal concluded that the reopening of the assessment under Section 147/148 was invalid due to lack of independent application of mind by the AO and reliance on borrowed reasons. Consequently, the reopening was quashed, and both appeals filed by the appellants were allowed. The Tribunal did not find it necessary to delve into the merits of the case since the reopening itself was held invalid. The order was pronounced in the open court on 27.09.2018.

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