2017 (5) TMI 836 - AT - Income Tax

Reopening of the assessment u/s 147 - addition made to capital gains by taking the sale consideration of the land at ₹ 40 lacs instead of actual sale consideration of ₹ 6 lacs - Held that - It is clear that there was only a photo copy receipt which was made basis for reopening of the assessment which has no evidentiary value. Therefore Ad CIT should have verify the facts and applied his mind before granting approval to the reopening of the assessment. He has merely quoted in Column 12 I am satisfied . It would be therefore clear from the fact of the case and on the basis of the aforesaid decisions relied upon by Ld. Counsel for assessee that the AdCIT has accorded his satisfaction in a mechanical way and as such the reopening of the assessment is wholly unjustified. In view of the above discussion it is clear that reopening of the assessment in the matter is wholly unjustified. - Decided in favour of assessee. 11. In view of the above discussions I set aside the orders of authorities below and quash the reopening of assessment in the matter. Resultantly additions made in the reassessment order stand deleted. There is no need to decide the other contentions raised by Ld. Counsel for assessee on merits.

Summary

Issues:
Reopening of assessment under section 147 of the I.T. Act and addition to capital gains based on discrepancy in sale consideration.

Analysis:
1. The assessee challenged the reopening of the assessment and the addition on merit before the Ld. CIT(A). The AO noted a variance in the sale consideration of a property, leading to an addition of &8377; 35,44,121 to the capital gains declared by the assessee.

2. The reasons recorded by the AO for reopening the assessment mentioned a difference in the sale consideration as per an agreement and the sale deed. The AO relied on a photocopy of the bayana receipt, but did not provide the source of information or verify the document adequately before issuing the notice under section 148.

3. The Tribunal observed that the AO did not establish a live link between the information received and the decision to reopen the assessment. The AO's reliance on a photocopy without verifying the original document or examining relevant persons was deemed insufficient. The Tribunal emphasized the importance of primary evidence over secondary evidence like photocopies.

4. The Tribunal referred to legal precedents to highlight the limited evidentiary value of photocopies and the necessity for the AO to apply due diligence before reopening assessments. The Tribunal criticized the mechanical approach taken by the AO and the approving authority, stressing the need for a meaningful review before issuing notices under section 148.

5. Citing relevant judgments, the Tribunal concluded that the reopening of the assessment was unjustified due to the lack of substantial evidence and the mechanical nature of the approval process. Consequently, the Tribunal set aside the orders of the lower authorities, quashed the reopening of the assessment, and deleted the additions made in the reassessment order.

6. The Tribunal's decision to allow the assessee's appeal was based on the procedural lapses in the reassessment process, highlighting the importance of proper verification and meaningful review before initiating such actions. The Tribunal's ruling focused on upholding the principles of due process and the necessity for valid reasons to justify reopening assessments under section 147 of the I.T. Act.