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2019 (11) TMI 861 - AT - Income TaxReopening of assessment u/s 147 - validity of reason to believe - borrowed satisfaction of the DDIT (Inv.) - HELD THAT - Reasons recorded by the AO to reopen the assessment of the assessee in the present case do not satisfy the requirement of section 147 of the Act. Information referred to by the AO in the reasons recorded (supra) is extremely scanty and vague. There is no reference to any document or statement, except reference of investigation report of DDIT (Inv.), Delhi and a general modus operandi of entry operators/providers and conclusions of the AO without any basis. Thus, the reasons recorded by the AO does not in fact have any reasons to believe the escapement of income. Further, it is evident that the AO did not apply his own mind to examine the basis/material of an information receipt from DDIT(Inv). AO accepted the information passed on DDIT (Inv.), which was vague in a mechanical manner which goes on to show that AO did not independently apply his mind on receipt of information from the DDIT has simply adopted the information received from the DIT (Investigation) as gospel of truth and thus the reason to belief escapement of income is not that of the AO but at best be said to be action mechanically carried out by the AO on receipt of report from DDIT (Inv.). The repetition of certain portions of the investigation report of DDIT without any reasons independently recorded by the AO on the basis of borrowed satisfaction of the DDIT (Inv.) cannot be the basis for reopening of assessment u/s. 147 of the Act. Therefore, following the ratio laid down by the Hon ble Delhi High Court in the case of Meenakshi Overseas Pvt. Ltd 2017 (5) TMI 1428 - DELHI HIGH COURT and various case laws as cited before us we hold that jurisdictional condition precedent in section 147 of the Act has not been satisfied by the AO for reopening the assessment. - Decided in favour of assessee.
Issues Involved:
1. Validity of reopening the assessment under Section 147 read with Section 148 of the Income-tax Act, 1961. 2. Adequacy of reasons recorded for reopening the assessment. 3. Application of mind by the Assessing Officer (AO) in forming the belief that income has escaped assessment. 4. Reliance on information from the Directorate of Income Tax (Investigation) without independent verification by the AO. 5. Legal precedents regarding the reopening of assessments based on information from the Investigation Wing. Detailed Analysis: 1. Validity of Reopening the Assessment under Section 147 read with Section 148: The assessee challenged the reopening of the assessment for the AY 2005-06 under Sections 147 and 148 of the Income-tax Act, 1961. The AO had reopened the assessment based on information from the Directorate of Income Tax (Investigation) indicating that the assessee was a beneficiary of accommodation entries. The Tribunal examined whether the reopening met the legal requirements of "reason to believe" that income had escaped assessment. 2. Adequacy of Reasons Recorded for Reopening the Assessment: The reasons recorded by the AO for reopening the assessment included a chart showing the assessee's receipt of accommodation entries. However, the Tribunal found that these reasons were vague and did not provide a clear basis for the belief that income had escaped assessment. The reasons merely reproduced information from the DIT (Investigation) without explaining how the AO concluded that the assessee was a beneficiary of bogus accommodation entries. 3. Application of Mind by the Assessing Officer (AO) in Forming the Belief: The Tribunal emphasized that the AO must independently apply his mind to the information received and form a belief based on tangible material. In this case, the AO did not conduct any independent inquiry or verification before recording the reasons for reopening. The AO's reasons were found to be mere conclusions without any supporting evidence or detailed examination of the transactions. 4. Reliance on Information from the Directorate of Income Tax (Investigation) Without Independent Verification: The Tribunal noted that while the AO can rely on information from the DIT (Investigation), he must independently verify and assess the information before forming a belief that income has escaped assessment. In this case, the AO's reasons were based solely on the information from the DIT (Investigation) without any independent verification or inquiry, which rendered the reopening invalid. 5. Legal Precedents Regarding the Reopening of Assessments Based on Information from the Investigation Wing: The Tribunal referred to several legal precedents, including the case of PCIT vs. Meenakshi Overseas Pvt. Ltd., where similar reasons for reopening based on information from the DIT (Investigation) were found to be inadequate. The Tribunal highlighted that the reasons for reopening must be self-evident and demonstrate a link between the information and the belief that income has escaped assessment. The Tribunal concluded that the AO's reasons in this case did not meet these legal requirements. Conclusion: The Tribunal held that the reopening of the assessment under Section 147 read with Section 148 was invalid as the AO did not independently apply his mind and the reasons recorded were vague and based on borrowed satisfaction from the DIT (Investigation). The appeal of the assessee was allowed, and the reopening of the assessment was quashed. Order: The appeal of the assessee is allowed. The reopening of the assessment under Section 147 read with Section 148 is quashed.
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