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2021 (5) TMI 660 - AT - Income TaxReopening of assessment u/s 147 - Addition u/s 68 - reassessment on basis of information received from REIC through Income Tax Officer, Ward 43(4), New Delhi - HELD THAT - As relying on assessee's own case . 2021 (2) TMI 734 - ITAT DELHI in absence of any contrary material brought to our notice, we hold that the Assessing Officer in the instant case has recorded incorrect/wrong and non-existing reasons in the reason for reopening of the assessment and has not applied his mind to the information received from REIC, Ward 43(4)(New Delhi). Therefore, the reopening of the assessment is illegal and bad in law and is liable to be quashed. Therefore, the additional grounds raised by the assessee are allowed.
Issues Involved:
1. Validity of reopening of assessment under Section 147 of the Income Tax Act. 2. Addition of ?27,29,000 under Section 68 of the Income Tax Act. 3. Determination of net profit rate. Issue-wise Detailed Analysis: 1. Validity of Reopening of Assessment under Section 147: The primary issue concerns the validity of the reopening of the assessment for the Assessment Year 2007-08 under Section 147 of the Income Tax Act. The Assessing Officer (AO) reopened the case based on information received from REIC through the Income Tax Officer, indicating that the assessee was involved in smuggling activities and had unexplained cash inflows. The Tribunal found that the AO had recorded "incorrect, wrong, and non-existing reasons" for reopening the assessment and had not applied his mind to the information received. The Tribunal referenced its decision in the assessee's own case for the subsequent assessment year (2008-09), where similar reasons for reopening were quashed. The Tribunal concluded that the reopening of the assessment was "illegal and bad in law" and quashed the reassessment proceedings. Consequently, all additions made as a result of the reassessment were deleted. 2. Addition of ?27,29,000 under Section 68: The AO made an addition of ?27,29,000 to the assessee's income under Section 68 of the Income Tax Act, citing unexplained cash deposits. The assessee explained that these amounts were either cash withdrawals or taken from partners. The CIT(A) upheld this addition, stating that the assessee failed to provide satisfactory evidence for the source of these cash deposits. The Tribunal, however, did not adjudicate on this issue separately, as the reopening of the assessment itself was quashed, rendering this addition academic in nature. 3. Determination of Net Profit Rate: The AO rejected the assessee's book results due to the non-production of books of accounts and adopted a profit rate of 15% of the total turnover, resulting in a net profit determination of ?38,28,061. The CIT(A) reduced this rate to 10%. The assessee contested this determination, arguing that the method of income computation by the AO was erroneous. However, the Tribunal did not address this issue separately, as the primary ground of the invalid reopening of the assessment was upheld, making this issue academic. Conclusion: The Tribunal allowed the appeal filed by the assessee, quashing the reopening of the assessment for AY 2007-08. The Tribunal held that the AO had not applied his mind to the information received and had recorded incorrect and non-existing reasons for reopening the assessment. Consequently, all additions made during the reassessment were deleted, and the other grounds raised by the assessee were not adjudicated as they were rendered academic.
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