2022 (8) TMI 289 - AT - Income Tax

Reopening of assessment u/s 147 - information received from the department of Commissioner of customs Preventive, New Delhi, for cheating of Govt., exchequer by misusing duty entitlement pass book scheme/draw back and focus product scheme - HELD THAT - The assessment was done u/s. 144 and reasons was recorded and the basis of information from the department of customs. During the proceedings u/s. 148, AO did not verified the sanctity of transaction related to assessee. Even the document showing with the proper record was not with the Revenue Authorities. The reasons record and nature of additions are totally different. In the order ld. AO himself not confirmed able to determine his own recorded reasons. Accordingly the addition made to be deleted. Appeal of assessee allowed.

Summary

Issues:
Appeal against order of Ld. CIT(A) for Assessment year 2006-07 under Income Tax Act, 1961.

Analysis:
1. The assessment under section 148 of the Income Tax Act was initiated based on information received regarding misuse of duty entitlement pass book scheme/drawback and focus product scheme. The AO added back net profit to the assessee's turnover, which was contested by the assessee. The CIT(A) upheld the addition, leading to the appeal before the ITAT.

2. The assessee argued that there was no export sale, thus no embezzlement of duty drawback. The counsel presented evidence from previous assessments and a letter from the Commissioner of Customs to support this claim. Additionally, the counsel highlighted discrepancies in the recorded reasons provided by the AO, asserting that the entire assessment order was flawed.

3. The ITAT considered the submissions and found that the AO did not verify the transactions properly or possess the necessary documents during the assessment. It was noted that the reasons recorded by the AO and the nature of the additions made were inconsistent. Consequently, the ITAT concluded that the addition of Rs. 19,96,990 should be deleted, ruling in favor of the assessee.

4. The decision was based on the lack of proper verification by the AO, discrepancies in the recorded reasons, and the failure to establish a clear connection between the allegations and the additions made to the assessee's income. As a result, the ITAT allowed the appeal of the assessee, overturning the decision of the lower authorities.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the reasoning behind the ITAT's decision to allow the appeal of the assessee.