2017 (7) TMI 371 - HC - Income Tax

Reopening of assessment - reasons to believe - accommodation entries addition - Held that - In the present case, the Court is unable to discern the link between the tangible material and the formation of the reasons to believe that income had escaped assessment. In the present case too, the information received from the Investigation Wing cannot be said to be tangible material per se without a further inquiry being undertaken by the AO. In the present case the AO deprived himself of that opportunity by proceeding on the erroneous premise that Assessee had not filed a return when in fact it had. To compound matters further the in the assessment order the AO has, instead of adding a sum of ₹ 78 lakh, even going by the reasons for reopening of the assessment, added a sum of ₹ 1.13 crore. On what basis such an addition was made has not been explained. This Court is satisfied that no error was committed by the ITAT in holding that reopening of the assessment under Section 147 of the Act was bad in law. - Decided in favour of assessee.

Issues:
Reopening of assessment under Section 147/148 of the Income Tax Act, 1961.

Analysis:
1. The appeal by the Revenue challenged the ITAT's order on the justification of the reopening of assessment by the Assessing Officer (AO) under Section 147/148 of the Act for the Assessment Year 2008-09.

2. The AO issued a notice under Section 147 of the Act to the Assessee based on information from the Income-tax Investigation Wing regarding accommodation entries received. However, errors in the reasons for reopening were later identified, including the incorrect assumption that no return was filed by the Assessee and an error in the total amount of accommodation entries.

3. The AO's reliance on previous cases to support the reopening was countered by the Court, emphasizing the need for the AO to apply mind to the available material before reopening an assessment.

4. The Court highlighted the importance of proper reasoning for reopening assessments, citing previous judgments where inadequate application of mind by the AO rendered the reopening invalid.

5. Drawing parallels to a similar case, the Court found that the information from the Investigation Wing alone was not sufficient to justify the reopening without further inquiry by the AO.

6. The Court noted discrepancies in the AO's assessment order, where an incorrect amount was added based on the flawed reasons for reopening, further indicating the lack of proper consideration by the AO.

7. Ultimately, the Court upheld the ITAT's decision, concluding that the reopening of the assessment under Section 147 of the Act was unjustified in this case, as errors in reasoning and lack of proper assessment were evident.

8. No substantial question of law was found to arise from the ITAT's order, leading to the dismissal of the appeal by the Revenue.

9. A separate application for condoning the delay in re-filing was allowed by the Court, concluding the judgment.

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