2015 (2) TMI 577 - AT - Income Tax

Reopening of assessment - CIT(A)quashing of notice issued under Section 148 - Held that - From a perusal of the reasons recorded, it is evident that the Assessing Officer has mentioned about some information by which the assessee is the beneficiary of an accommodation entry of ₹ 6 lakhs because some bank instrument was got prepared on 19.04.2002 of ₹ 6 lakhs in favour of the assessee presentable at Bank of Baroda, Faridabad. Now, in the reasons recorded, there is no mention about the name of the person who are the alleged entry provider. The nature of the entry i.e. in which form the assessee is alleged to be taking entries is given. The information only says that some bank instrument of 6 lakhs was got prepared. When the factual details are compared with the reasons recorded, we find that the reasons recorded are vague and factually incorrect also. No bank instrument of 6 lakhs was received by the assessee. No justification to interfere with the order of learned CIT(A) - Decided against revenue. Addition of ₹ 12 lakhs - CIT(A) deleted the addition - Held that - Once the reopening of assessment itself has been held to be invalid, consequentially, the assessment order passed in pursuance to such notice under Section 148 would not survive. - Decided against revenue.

Summary

Issues:
1. Validity of notice issued under Section 148 of the Income-tax Act, 1961.
2. Escapement of income and justification for reopening the assessment.
3. Deletion of addition of `12 lakhs.

Issue 1: Validity of notice issued under Section 148:
The appeal by the Revenue challenged the quashing of the notice issued under Section 148 of the Income-tax Act, 1961 by the CIT(A) for the AY 2003-04. The Assessing Officer's reasons for reopening the assessment mentioned an alleged accommodation entry of `6 lakhs received by the assessee. However, during the hearing, it was argued that the reasons were factually incorrect, vague, and did not point out any income escapement. The counsel highlighted discrepancies in the reasons recorded and the actual gifts received by the assessee. The Tribunal found the reasons vague and incorrect, citing precedents where the Assessing Officer failed to act on "reasons to believe" and instead acted on suspicion, rendering the notice invalid.

Issue 2: Escapement of income and justification for reopening the assessment:
The Revenue argued that a tentative belief of income escapement sufficed for issuing the notice under Section 148. They claimed to have received definite information regarding accommodation entries benefiting the assessee. However, the Tribunal noted that the information provided by the Investigation Wing did not align with the reasons recorded by the Assessing Officer. The Tribunal emphasized the importance of proper examination of information before forming a belief of income escapement. It differentiated this case from a precedent where material before the Assessing Officer enabled a prima facie conclusion. Ultimately, the Tribunal upheld the CIT(A)'s decision based on the factual discrepancies and lack of proper examination of information.

Issue 3: Deletion of addition of `12 lakhs:
The Revenue's appeal also contested the deletion of the addition of `12 lakhs. However, since the reopening of assessment was deemed invalid, the assessment order based on such notice could not stand. Consequently, the Tribunal considered this ground of appeal as infructuous and rejected it. The appeal of the Revenue was dismissed, affirming the decision of the CIT(A).

In conclusion, the Tribunal upheld the CIT(A)'s decision, emphasizing the importance of proper examination of information before reopening assessments and highlighting the need for valid reasons to believe in income escapement. The appeal by the Revenue was dismissed, and the decision was pronounced on 22nd August 2014.