2020 (8) TMI 589 - AT - Income Tax

Validity of reopening of the assessment - as per AIR data information received from the Office of the DIT CIB Rajasthan, Jaipur showing that the assessee has paid credit card bills in the financial year 2008-09 - AO received the information about the credit card bills payment - HELD THAT - AO has not made any addition but accepted the return of income declared by the assessee in the original return of income while passing the order on 08.08.2017. AO has reopened the assessment only on suspicion of escapement of income on account of credit card payment without considering the fact that the assessee already filed his return of income declaring total income as income under the head Salary . The AO during the course of assessment proceedings verified the income of the assessee from M/s. Genpact India as well as the details of the credit card payment from Citibank and the AO has received the requisite details from the said company. In the case in hand, the assessee has duly brought to the notice of the ld. CIT (A) that the return of income was filed on 9th July, 2010. However, without considering the same, the ld. CIT (A) upheld the reopening of the assessment by recording the reasons on incorrect facts. Hence in the facts and circumstances of the case, we find that the reopening of the assessment by the AO is without application of mind and simply going by the information received as per AIR Data. Hence the reopening of the assessment is quashed being invalid. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening of assessment under section 148.
2. Assessment of income under section 144 ignoring evidence and deductions.
3. Addition of ?3,85,336 on account of credit card payment without considering bank account details.

Issue-Wise Detailed Analysis:

1. Validity of Reopening of Assessment under Section 148:
The primary issue is whether the reopening of the assessment under section 148 was valid. The assessee argued that the reopening was based on incorrect information and mere suspicion without a valid reason to believe that income had escaped assessment. The AO issued a notice under section 148 based on AIR data indicating the assessee paid ?3,85,336 against credit card bills and had not filed a return of income for the relevant year. The assessee contended that the return was filed on 9th July 2010, which was acknowledged by the department, and the reopening was invalid as it ignored this fact. The Tribunal found that the AO's reasons for reopening were factually incorrect, as the return was indeed filed, and the belief of income escapement was based on incorrect assumptions. Consequently, the reopening was quashed as invalid.

2. Assessment of Income under Section 144 Ignoring Evidence and Deductions:
The assessee challenged the assessment under section 144, arguing that the AO ignored evidence of TDS and deductions claimed in the return filed under section 139(4). The return showed income from salary, deductions under chapter VIA, and TDS, which were verifiable from Form No. 16, LIP receipts, and the bank statement. The Tribunal noted that the AO did not consider these details and the return filed by the assessee was mistakenly considered for the assessment year 2010-11 instead of 2009-10. The Tribunal found the assessment under section 144 unjustified as it ignored the available evidence and deductions.

3. Addition of ?3,85,336 on Account of Credit Card Payment without Considering Bank Account Details:
The AO added ?3,85,336 to the income on account of credit card payments without verifying the bank account of the assessee. The assessee argued that all transactions were through the bank account and online payments. The Tribunal observed that the AO failed to consider these facts and the transactions were verifiable from the bank account. The addition was made on mere suspicion without proper verification, leading to an arbitrary assessment.

Conclusion:
The Tribunal quashed the reopening of the assessment under section 148, finding it invalid due to incorrect facts and lack of application of mind by the AO. Consequently, the assessment under section 144 and the addition of ?3,85,336 were also invalidated. The appeal of the assessee was allowed, and the reassessment order was set aside.