2019 (3) TMI 555 - AT - Income Tax

Reopening of assessment - undisclosed income of assessee under section 68 - lack of mind while recording the reasons for reopening of the assessment - non independent application of mind - borrowed knowledge - HELD THAT - Non-application of mind on the part of the A.O. while recording the reasons for reopening of the assessment. He has recorded incorrect amount which escaped assessment. His conclusion was merely based on observations and information received from DIT (Inv.), New Delhi, which is not brought on record and his conclusion is merely based on doubts because he was not sure whether transaction in question is genuine or not. Therefore, the decisions relied upon by the Learned Counsel for the Assessee squarely apply to the facts and circumstances of the case. The decisions relied upon by the Ld. D.R. would not support the case of the Revenue. Since, there is a total lack of mind while recording the reasons for reopening of the assessment, therefore, assumption of jurisdiction under section 147/148 of the I.T. Act, 1961, is bad and illegal. The A.O. was not justified in assuming jurisdiction under section 147/148. Reopening of the assessment in the matter is bad in law and illegal, as such, same cannot be sustained in law - Decided in favour of assessee

Issues Involved:
1. Reopening of assessment under section 147/148 of the I.T. Act, 1961.
2. Addition of ?1.90 crores under section 68 of the I.T. Act, 1961.

Detailed Analysis:

1. Reopening of Assessment under Section 147/148 of the I.T. Act, 1961:
The assessee challenged the reopening of the assessment on the grounds that the Assessing Officer (A.O.) recorded reasons for reopening without independent application of mind and merely adopted vague information provided by the Investigation Wing. The A.O. did not verify or examine the report or material produced before him and concluded without verifying the facts that it was a case of reopening the assessment. The assessee argued that the reasons recorded were invalid and bad in law and relied on several judicial decisions to support this contention.

The Tribunal noted that the A.O. had merely reproduced the information received from the Investigation Wing without any independent application of mind. The A.O. concluded that the transactions seemed to be non-genuine without verifying the transactions or specifying the nature of the alleged accommodation entries. The Tribunal emphasized that the reasons to believe must demonstrate a link between the tangible material and the formation of the belief that income had escaped assessment. The Tribunal found that the A.O. failed to independently apply his mind to the report of the Investigation Wing and merely formed a conclusion based on the information received.

The Tribunal cited several judicial decisions, including the Hon’ble Delhi High Court's rulings in Pr. CIT vs. Meenakshi Overseas Pvt. Ltd., Pr. CIT vs. G & G Pharma India Ltd., and Pr. CIT vs. RMG Polyvinyl (I) Ltd., which held that reopening of assessment based on mere information from the Investigation Wing without independent application of mind by the A.O. is invalid.

The Tribunal concluded that there was a total non-application of mind by the A.O. while recording the reasons for reopening the assessment. The A.O. recorded incorrect amounts and his conclusion was merely based on observations and information received from the Investigation Wing, which was not brought on record. Therefore, the Tribunal held that the assumption of jurisdiction under section 147/148 was bad and illegal and quashed the reopening of the assessment.

2. Addition of ?1.90 Crores under Section 68 of the I.T. Act, 1961:
The A.O. made an addition of ?1.90 crores as undisclosed income under section 68 of the I.T. Act, 1961, on the grounds that the assessee had raised share capital from 32 parties, including ?5 lakhs from M/s. V.R. Traders Pvt. Ltd. The A.O. issued letters under section 133(6) to the parties, but the same were returned unserved, although the parties confirmed the transactions.

The assessee contended that it had received genuine share capital supported by share application forms, confirmations, bank statements, and board resolutions. The assessee argued that the burden of proving the genuine credits was discharged.

However, since the Tribunal quashed the reopening of the assessment, it did not need to decide on the merits of the addition under section 68. The Tribunal set aside the orders of the authorities below and deleted the entire addition of ?1.90 crores.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the reopening of the assessment under section 147/148 of the I.T. Act, 1961, due to the A.O.'s failure to independently apply his mind and merely relying on information from the Investigation Wing. Consequently, the addition of ?1.90 crores under section 68 was also deleted.

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