2024 (6) TMI 425 - AT - Income Tax

Reopening of assessment u/s 147 - unexplained cash credit u/s 68 - eligibility of reasons to believe - HELD THAT - Formation of belief made by the ld. Assessing Officer should have a live nexus between the information possessed by him, vis- -vis his belief. A perusal of the above reasons would indicate that the first four line only make a mention about the nature of information possessed by the AO and thereafter made reference to a list of 13 Companies. AO after reproduction the details of 13 Companies and observed that as per MCA data and ITD module, these Companies are paper/shell companies having no real existence and business activities. The ld. Assessing Officer himself has not made any inquiry about the nature of these Companies. The assessee had not taken the money from all these 13 Companies. AO nowhere analyzed as to how which Company has received the money from the assessee and how it has been layered to reach to the accounts of the assessee. He has simply reproduced certain information from the Website of the Income Tax Portal and formed the belief that income has escaped. There was no application of mind at the end of ld. Assessing Officer while forming a belief that income has escaped assessment. He has relied upon the information without analytically examining at his own end and reopened the assessment. We allow this fold of grievance and quash the reopening of assessment. Appeal of assessee allowed.

Summary

Issues Involved:
1. Validity of reopening of assessment by issuance of notice u/s 148.
2. Addition of Rs. 94,50,000/- as unexplained cash credit u/s 68 of the Income Tax Act.

Summary:

Validity of Reopening of Assessment:
The assessee challenged the reopening of assessment by issuance of a notice u/s 148. The ld. Counsel for the assessee argued that the reasons recorded by the ld. Assessing Officer were vague and lacked a live nexus between the information possessed and the belief that income had escaped assessment. The reasons mentioned involvement of 13 companies, but the assessee had only dealt with three companies. The ld. Assessing Officer did not independently verify the details but relied on information from the MCA data and ITD module, which labeled the companies as paper/shell companies. The Tribunal observed that the ld. Assessing Officer did not apply his mind and merely reproduced information without analytical verification. Consequently, the Tribunal quashed the reopening of assessment, stating that there was no application of mind by the ld. Assessing Officer.

Addition of Rs. 94,50,000/- u/s 68:
Since the reopening of assessment was quashed, the Tribunal did not record any findings on the merits of the addition of Rs. 94,50,000/- as unexplained cash credit u/s 68. The Tribunal allowed the appeal of the assessee and deleted the addition.

Conclusion:
The appeal of the assessee was allowed, and the reopening of assessment was quashed due to lack of application of mind by the ld. Assessing Officer. Consequently, the addition of Rs. 94,50,000/- was deleted.