2019 (5) TMI 1597 - AT - Income Tax

Reopening of assessment u/s 148 - information received from DDIT Investigation - Borrowed information - unexplained sources of funds from which the assessee has made donations for his daughter - HELD THAT - A perusal of the certificate shows that the tuition fees for the first year is ₹ 4 lacs and the total tuition fees for the entire course of four and half years is 18 lacs. I find that neither the A.O nor the CIT(A) has made any enquiry from the Institution regarding this certificate. Thus, the AO has acted mechanically and without any independent application of mind. It is also evident that while alleging cash payment , it is not even known or stated on which date and on what basis such sums was allegedly paid by assessee; the reasons recorded are therefore vague, highly non specific and reflect complete non-application of mind. That reasons recorded are 'reason to suspect' and, is a mere attempt to carry out fishing and roving expedition. It is also noted that in the absence of specific and incriminating material much less tangible and, relevant material to form even prime facie belief that there was alleged payment is also apparent from the fact that the alleged document found and seized during the course of search/survey action u/s 132/133A does not reflect any figure and in the absence of any independent enquiry or examination of facts on record or noticing the content of alleged documents in the reasons recorded and, reasons being silent as to the specific facts, the vague allegation shows that action has been taken mechanically on the basis of alleged report of investigation wing, and, not on independent application of mind and therefore on this ground too, the proceedings are without jurisdiction. It is also noted that there is no live link or direct nexus between alleged material and, inference. It is a case of investigation in the garb of action u/s 148 on the basis that proceedings have been initiated on the basis of no material much less any tangible and, relevant material and as such reasons record do not constitute valid reason to believe for initiating proceedings u/s 147. Therefore, respectfully following the findings of the Co-ordinate Benches SHRI SHIV CHARAN GOEL VERSUS ITO 2018 (6) TMI 884 - ITAT DELHI and MEGHA GUPTA VERSUS ITO 2018 (3) TMI 1767 - ITAT DELHI , I am of the considered view that the proceedings initiated by invoking provisions of Section 147 of the Act are non east of law and without jurisdiction. Hence, the assessment is quashed. - Decided in favour of assessee

Summary

Issues Involved:
1. Reopening of the assessment.
2. Addition of ?33,15,990 to the returned income of the assessee.

Issue-wise Detailed Analysis:

1. Reopening of the Assessment:
The assessee challenged the reopening of the assessment on several grounds. The Assessing Officer (A.O.) reopened the assessment based on information from the DDIT Investigation, Unit 5 (1), New Delhi, indicating that the assessee paid donations and fees for his daughter's admission to Santosh Medical College, Ghaziabad. The A.O. issued a notice under Section 148 of the Income Tax Act after recording reasons and obtaining prior approval from the Principal Commissioner of Income Tax (PCIT), Ghaziabad.

The assessee argued that the A.O. did not conduct any independent inquiry or investigation and merely relied on the information provided by the Investigation Wing. The Counsel for the assessee contended that the total tuition fees for the first year was only ?4 lakhs, and the complete fee for the four-and-a-half-year course was ?18 lakhs, contradicting the A.O.'s claim of ?30.12 lakhs. The Counsel cited the Co-ordinate Bench's decision in ITA No. 4035/Del/2017, which favored the assessee on similar facts.

The Tribunal noted that the reasons recorded for reopening the assessment were based solely on the information received from the Investigation Wing without any independent application of mind by the A.O. The Tribunal referenced the Hon'ble Delhi High Court's decision in Signature Hotels Pvt. Ltd. Vs. ITO, which emphasized that the A.O. must apply his own mind to the information and establish a nexus for the escapement of income. The Tribunal found that the reopening did not satisfy the requirements of Section 147 of the Act and was, therefore, invalid.

2. Addition of ?33,15,990 to the Returned Income of the Assessee:
The A.O. added ?30.12 lakhs to the assessee's income, treating it as unexplained and made out of undisclosed sources. The assessee contested this addition, stating that the total fees paid for the year were ?4.10 lakhs, with contributions from the assessee, his daughter, and his wife. The Tribunal found that the A.O. and the CIT(A) did not make any inquiries from the institution regarding the certificate provided by the assessee, which detailed the tuition fees structure.

The Tribunal also referenced the Co-ordinate Bench's decision in ITA No. 1106/Del/2018, which dealt with a similar issue and concluded that the A.O. had acted mechanically based on information from the Investigation Wing without any independent application of mind. The Tribunal emphasized that the reasons recorded for reopening the assessment were vague and lacked specific details, reflecting non-application of mind.

Based on the aforementioned findings and precedents, the Tribunal quashed the assessment order, holding that the proceedings initiated under Section 147 were without jurisdiction. Consequently, the addition made by the A.O. was also invalidated.

Conclusion:
The appeal filed by the assessee was allowed, with the Tribunal quashing the assessment order and invalidating the addition of ?33,15,990 to the returned income of the assessee. The Tribunal emphasized the importance of independent application of mind by the A.O. and the necessity of establishing a clear nexus for the escapement of income.