2024 (5) TMI 1289 - AT - Income Tax

Validity of reassessment proceedings - reasons to believe - independent application of mind or borrowed satisfaction - bogus LTCG - as argued reasons recorded by the AO lacks the individual application of mind by the AO and recorded in a mechanical manner without carrying out any enquiry and were in fact based upon the borrowed satisfaction - HELD THAT - AO has discussed the information received from the ITBA data that assessee was having transactions from trading in penny scrip during the F.Y. 2014-15 and thereafter in third paragraph the AO has noted that the assessee has claimed an exempt income. Though the scrutiny was done in this case on the basis of information available in the e-filing records. It was earned much more LTCG but did not disclose such exempt income which indicates the intention of the assessee conceal this fact from the eye of the department. Thereafter, the AO re- assessed the income of the assessee under the provisions of section 147 of the Act making an addition in the hands of assessee which is not sustainable according to ld. AR. We find merit in the contentions of the ld. AR that the AO has recorded the reasons based on the borrowed satisfaction without application of mind and without carrying out any enquiry into case. We also note that assessee filed Schedule-EI which contained the details of exempt income earned during the year by the assessee disclosing sum as long term capital gain from the transaction. Thus the AO noting in the reasons that the assessee has not disclosed the capital gain in the return of income is also not correct by making an addition in the hands of assessee. In our opinion, AO has acted on the borrowed satisfaction without recording his own satisfaction and belief that income of the assessee has escaped assessment. The case of the assessee finds support from the decision of Meenakshi Overseas (P) Ltd. 2017 (5) TMI 1428 - DELHI HIGH COURT We are inclined to quash the assessment framed by the AO as the same lacks of any independent application of mind and is based upon the borrowed satisfaction of the Investigation Wing. Appeal of the assessee is hereby allowed.

Summary

Issues involved:
The issues involved in this case include jurisdiction of assessment, validity of proceedings u/s 148, acceptance of proceedings based on vague information, lack of tangible material, absence of full reasons for reopening, addition made u/s 68 to total income, and the validity of assessment based on lack of individual application of mind by the AO.

Jurisdiction of Assessment:
The appeal challenged the assessment for the year 2015-16, arguing that the proceedings initiated by issuing notice u/s 148 by ITO, Ward-37(3) lacked jurisdiction as the case belonged to ITO, Ward-45(1), Kolkata.

Validity of Proceedings u/s 148:
The appellant contended that the proceedings u/s 148 were not maintainable, as they were initiated without tangible material or independent enquiry, solely based on vague information from the investigating wing.

Acceptance of Proceedings Based on Vague Information:
The appellant further argued that the ld. CIT(A) erred in accepting the proceedings initiated by the AO without proper examination, solely on suspicion and surmises, which was not maintainable.

Lack of Full Reasons for Reopening:
The appellant raised concerns that the reasons supplied for reopening were only extracts, not the full exact copy, which rendered the re-assessment invalid.

Addition Made u/s 68 to Total Income:
The appellant contested the addition made by the AO of Rs. 9,16,444/- u/s 68 to the total income, claiming it was not justified.

Validity of Assessment Based on Lack of Individual Application of Mind by the AO:
The main grievance of the appellant was challenging the validity of assessment, arguing that the reasons recorded for reopening lacked individual application of mind by the AO and were based on borrowed satisfaction, without proper enquiry. The Tribunal quashed the assessment, citing lack of independent application of mind and reliance on borrowed satisfaction.

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