2018 (5) TMI 738 - AT - Income Tax

Validity of re-opening of assessment - information received through AIR - Transaction with Standard Chartered Bank, Payment for purchase of bonds issued by RBI and Purchase of immovable property - non independent application of mind - Held that - AO has reopened the assessment to verify the three transactions mentioned above. As rightly pointed out by learned AR, the Assessing Officer has received information about the transactions and he did not refer to any material from which he drew the belief that there was escapement of income. The question as to whether or not there was escapement of income could have been answered by the AO only after making fishing enquiries. Hence there is merit in the contentions of the Ld A.R that the information received by the AO merely gave reason to suspect that there was escapement of income. The reopening of assessment on the basis of suspicion is not valid as held by Hon ble Gujarat High Court in the case of Bakulbhai Ramanlal Patel Vs. ITO (2011 (3) TMI 1576 - GUJARAT HIGH COURT). Admittedly, Assessing Officer did not make any additions in respect of above said three issues meaning thereby, the Assessing Officer was satisfied during the course of reassessment proceedings that the above said three transactions does not warrant any additions. Since no addition was made in respect of issues from which the Assessing Officer drew belief that there was escapement of income, it is not open for him to make any other addition - Decided in favour of assessee

Summary

Issues Involved:
Validity of re-opening of assessment and validity of various additions made in the reopened assessment.

Analysis:
1. The appeal challenged the order dated 31.8.2016 by the CIT(A)-46, Mumbai, relating to A.Y. 2007-08. The assessee contested the re-opening of assessment and the additions made.

2. The Assessing Officer reopened the assessment based on information received regarding transactions with Standard Chartered Bank, investments in RBI Bonds, and purchase of immovable property. The assessee argued that the reopening was unjustified as it was solely based on suspicion without concrete evidence, citing relevant case laws.

3. The assessee refuted the allegations, stating no bank account with Standard Chartered Bank, no property purchase on the specified date, and RBI bond purchases through bank accounts. The AR relied on the principle that if no income escapement is found after reopening, no additional assessment can be made, following the decision in CIT Vs. Jet Airways.

4. The CIT(A) found an error in the report by the Sub-Registrar, leading to a mistaken recording of reasons by the Assessing Officer. The AR emphasized that reasons once recorded cannot be altered, citing Hindustan Lever Ltd. Vs. R B Vadkar.

5. The Tribunal noted that no additions were made by the Assessing Officer regarding the transactions prompting the reassessment, indicating satisfaction with the explanations provided. Following the decision in Jet Airways case, all additions in the reassessment were deemed invalid and ordered to be deleted.

6. The Tribunal concluded that the re-opening of assessment lacked legal validity and ordered the quashing of the assessment order, setting aside the CIT(A)'s decision. The appeal by the assessee was allowed, and the order was pronounced on 1.5.2018.