2023 (10) TMI 1024 - AT - Income Tax

Validity of reopening of assessment - information received from the Investigation Wing - independent application of mind or borrowed satisfaction - CIT(A) deleted addition - HELD THAT - Though, the assessee has filed his return of income voluntarily disclosing the transaction appearing in the bank account, however, being completely oblivious of the return of income filed by the assessee, AO has proceeded to reopen the assessment merely relying upon the information received from the Investigation Wing. The very fact that the AO has proceeded to reopen the assessment assuming that the assessee has not filed his return of income for the assessment year under dispute, clearly reveals non-application of mind by the AO to the facts and materials on record. On perusal of return of income and the computation of income filed by the assessee, it is evident that the assessee has considered the income derived from sale of property credited to the bank account. That being the factual position emerging on record, in our view, reopening of assessment appears to be without proper application of mind and based on conjectures and surmises. There is no live link between the materials available on record and the formation of belief. Therefore FAA was justified in holding the reopening of assessment u/s 147 to be invalid. On merits also, the assessee has made out a strong case. As rightly observed assessee furnished the necessary details explaining the source of the credit entries. Without properly examining the materials brought on record, the Assessing Officer has made the addition. Since, the assessee has explained the source of credit entries, in our view, Commissioner (Appeals) was justified in deleting the addition. Accordingly, we uphold the decision of Commissioner (Appeals) by dismissing the grounds of appeal.

Summary

Issues Involved:
The appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2012-13.

Issue 1: Validity of Reopening of Assessment under Section 147 of the Act
The Assessing Officer reopened the assessment due to unreported bank credits. The Commissioner (Appeals) found the reopening invalid as it lacked independent inquiry and proper application of mind, relying on judicial precedents.

Issue 2: Treatment of Credit Entries in Bank Account
The Commissioner (Appeals) observed that the assessee disclosed and explained the credit entries in the bank account in the return of income. Consequently, he held that the entries cannot be considered unexplained cash credit under section 68 of the Act, leading to the deletion of the addition.

Key Details:
- The non-resident individual declared income in the return but did not report a substantial bank credit.
- The Assessing Officer reopened the assessment, treating the unexplained credit as income.
- The Commissioner (Appeals) found the reopening invalid due to lack of independent inquiry and mechanical approval.
- The Commissioner (Appeals) deleted the addition, considering the explanation provided by the assessee for the bank credit.
- The Tribunal upheld the decision, emphasizing the proper disclosure and explanation of the credit entries by the assessee.

This summary provides a detailed overview of the issues involved in the legal judgment, highlighting the key arguments and decisions made by the authorities involved.