2020 (12) TMI 1071 - AT - Income Tax

Reopening of assessment u/s 147 - non independent application of mind by AO - Borrowed satisfaction - information received from ADIT(Inv.), Mehsana - HELD THAT - Only document relevant to the issue of recording reason is the information received from ADIT(Inv.), Mehsana - There is no other document filed by the revenue that any information on the basis of which the case of the assessee was reopened was received on or before date of recording reason i.e. 30/03/2015. As per the evidences provided by the revenue, the information pertaining to the assesse wherein reference to the documents was made was the letter of the ADIT(Inv.), Mehsana dated 31/03/2015 as cited above in this order and the revenue has not placed any evidence or material to substantiate that the information/document was provided to the assesse by any other authority on or before 30/03/2015 on the basis of which was case was reopened. There is no other document produced before us by the Revenue to controvert for any information and material has been provided to the Assessing Officer on 19/03/2015 by the ADIT(Inv.). Revenue has failed to demonstrate with relevant material or evidences that copies of document/information provided by the ADIT(Inv.) was available with the AO on or before recording reason for reopening of the assessment i.e. 30/03/2015 and further in our considered opinion, A.O. has reopened the assessment solely on the basis of information received of the ADIT (Investigation) and without forming an independent opinion and there cannot be any reassessment for verification and without satisfying the requisite condition under the law. A.O. issued notice to the assessee without any application of mind and satisfaction and same is not sustainable in the eyes of law - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the reopening of the assessment under Section 147 of the Income Tax Act.
2. Validity of the addition of ?10,00,58,873/- to the income of the assessee based on the alleged undervaluation of the sale consideration.

Issue-wise Detailed Analysis:

1. Legality of the Reopening of the Assessment under Section 147 of the Income Tax Act:

The assessee challenged the reopening of the assessment on the grounds that it was based on borrowed satisfaction without forming an independent opinion. The original assessment was completed under Section 143(3) on 10/11/2010, and the reopening was initiated after four years from the end of the relevant assessment year. The assessee argued that the reopening was based solely on information received from the ADIT (Investigation) without any independent verification by the Assessing Officer (A.O.).

The Tribunal noted that the A.O. mentioned receiving information from the ADIT (Investigation) on 19/03/2015, but the letter from the ADIT (Investigation) was dated 31/03/2015. This discrepancy indicated that the reasons for reopening were recorded on 30/03/2015, before the information was officially received on 31/03/2015. The Tribunal found that the revenue failed to demonstrate that the information was available to the A.O. on or before 30/03/2015. It concluded that the A.O. reopened the assessment solely based on the information from the ADIT (Investigation) without forming an independent opinion, which is a requirement under the law. Therefore, the reopening of the assessment was deemed invalid and quashed.

2. Validity of the Addition of ?10,00,58,873/- to the Income of the Assessee:

The addition was based on the alleged undervaluation of the sale consideration of the land sold by the assessee. The A.O. received information from the ADIT (Investigation) that an agreement dated 06/01/2007 indicated a sale consideration of ?10,95,58,873/-, whereas the registered sale deed dated 20/12/2007 showed a consideration of ?95,00,000/-. The A.O. added the difference of ?10,00,58,873/- to the income of the assessee.

The assessee argued that the agreements referred to by the A.O. were never executed by them, and the documents were forged. The assessee also contended that the agreements were canceled on 07/01/2007, and the consideration mentioned in the sale deed was the correct value. The CIT(A) upheld the addition, stating that the evidences, including circumstantial evidences, suggested that the fair market value of the land was ?10,95,58,873/-.

However, since the Tribunal quashed the reopening of the assessment, the addition of ?10,00,58,873/- was also rendered invalid. The Tribunal did not adjudicate on the merits of the addition, as the reassessment proceedings themselves were found to be invalid.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, quashing the reopening of the assessment under Section 147 of the Income Tax Act and rendering the addition of ?10,00,58,873/- invalid. The reassessment proceedings were deemed to have been initiated without proper application of mind and independent satisfaction by the A.O.