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2014 (8) TMI 761 - AT - Income TaxReopening of assessment u/s 147/148 No application of mind - Held that - Following the decision in Commissioner of Income Tax - III Versus M/s Suren International Pvt. Ltd. 2013 (5) TMI 414 - DELHI HIGH COURT - the AO except preparing the table of accommodation entries from the details claimed to have been received from the Investigation Wing, has not at all applied his mind - assessee rightly contended that there was no failure on the part of the assessee to disclose all material facts because in the documents attached to the return of income, all primary facts were disclosed - the contention of the assessee is that the AO issued the notice u/s 148 mechanically simply on the basis of information alleged to have been received from the Investigation Wing without application of mind - the reasons recorded without any application of mind cannot be said to be a proper belief with regard to escapement of income the order of the CIT(A) is upheld Decided against Revenue.
Issues Involved:
1. Validity of reopening the case under Section 147/148 of the Income Tax Act. 2. Application of mind by the Assessing Officer in issuing the notice under Section 148. 3. Reliance on information from the Investigation Wing without independent verification. Issue-Wise Detailed Analysis: 1. Validity of Reopening the Case under Section 147/148: The Revenue challenged the order of the CIT(A), arguing that the reopening of the case under Section 147/148 was valid, citing the decision of the jurisdictional High Court in Midland Fruit and Vegetables Products (India) Ltd vs. CIT (1994) 208 ITR 266. The learned DR contended that the Assessing Officer had received definite information from the Director of Income Tax (Investigation) regarding accommodation entries provided by various entry operators, and the assessee was a beneficiary of such entries. The CIT(A) had ruled that the reopening was invalid, but the Revenue argued that the reopening was based on specific information and thus valid. 2. Application of Mind by the Assessing Officer: The counsel for the assessee argued that the Assessing Officer had issued the notice under Section 148 without proper application of mind, merely reproducing details received from the Investigation Wing. It was pointed out that the same entry was mentioned twice in the reasons recorded, indicating a lack of independent verification by the Assessing Officer. The CIT(A) had examined the records and found no evidence that the assessee was the beneficiary of the accommodation entries. The Tribunal found that the Assessing Officer had not applied his mind independently, as several items in the chart were considered twice, which was indicative of non-application of mind. 3. Reliance on Information from the Investigation Wing: The Tribunal noted that the reasons recorded by the Assessing Officer were largely based on the investigation report from the Director of Income Tax (Investigation), which discussed the general modus operandi of entry operators. The specific facts relating to the assessee's case were only briefly mentioned, and several items were repeated in the chart. The Tribunal referenced the jurisdictional High Court's decision in CIT vs. Suren International P. Ltd., which held that reasons recorded without application of mind could not form a proper belief regarding the escapement of income. The Tribunal found that the Assessing Officer had relied on the information from the Investigation Wing without independent verification, leading to a mechanical issuance of the notice under Section 148. Conclusion: The Tribunal upheld the order of the CIT(A), concluding that the reopening of the assessment was invalid due to the lack of application of mind by the Assessing Officer and the reliance on unverified information from the Investigation Wing. The appeals filed by the Revenue were dismissed, and the decision was pronounced in open court on 14th August 2014.
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