2021 (4) TMI 193 - AT - Income Tax

Reopening of assessment u/s 147 - addition u/s 68 - reasons recorded AO has mentioned that accommodation entry has been escaped and issued noticed u/s. 148 - HELD THAT - In response to notice assessee filed the objection which was decided in a summary manner. We further find that after considering the reply filed by the assessee as well as documentary evidences, the AO has made the addition of ₹ 15 lacs u/s. 68 of the Act whereas AO has issued the notice u/s.148 of the Act for escapement of income of ₹ 75 lacs which is contrary in law and shows the non-application of mind on the part of the assessee. Hence, on this account, the assessment in dispute framed by the AO is bad in law and deserve to be quashed. Exactly under the similar facts and circumstances there are various cases, as relied by the ld. Counsel for the assessee, in which similar issue has been adjudicated and decided in favour of the assesee wherein the assessment has been quashed, especially in the recent decision passed in the case of Smt. Meena Gupta 2020 (9) TMI 533 - ITAT DELHI - Thus assessment framed in the present case is hereby quashed. - Decided in favour of assessee.

Summary

Issues:
Reopening of assessment under section 147 of the Income Tax Act, 1961 based on accommodation entry, Addition made under section 68 of the Act, Non-application of mind by Assessing Officer, Justification for reopening assessment, Similar cases where assessment was quashed, Application of mind by the assessing authority.

Analysis:

Reopening of Assessment under Section 147:
The case involved the reopening of the assessee's assessment under section 147 of the Income Tax Act, 1961, based on an accommodation entry. The Assessing Officer (AO) issued a notice under section 148 of the Act for escapement of income. However, the AO made an addition of ?15 lakhs under section 68 of the Act, contrary to the initial claim of ?75 lakhs. The Tribunal found this discrepancy as a clear indication of non-application of mind by the AO, rendering the assessment bad in law.

Addition Made under Section 68:
The AO's decision to add ?15 lakhs under section 68 of the Act was deemed unjustified due to the discrepancy between the alleged amount in the notice and the actual addition made. The Tribunal highlighted that the AO did not verify the information properly, leading to an incorrect assessment. The case was compared to similar instances where assessments were quashed due to similar factual errors and lack of application of mind by the assessing authority.

Non-Application of Mind by Assessing Officer:
The Tribunal emphasized the importance of the AO applying his mind diligently while making assessments. It was noted that the AO's reliance on incorrect and non-existing material without proper verification led to an erroneous assessment. The Tribunal cited a previous judgment where assessments were invalidated due to the AO's failure to verify information supplied by the Investigation Wing, indicating a recurring issue of non-application of mind by the assessing authority.

Justification for Reopening Assessment:
The Tribunal found that the reasons recorded for reopening the assessment were based on incorrect and non-existing material, indicating a lack of justification for the reassessment. The Tribunal reiterated that assessments should be made after careful consideration of all relevant facts and evidence to ensure the legality and validity of the process.

Similar Cases Where Assessment Was Quashed:
The Tribunal referenced previous cases where assessments were quashed under similar circumstances, highlighting a consistent pattern of incorrect assessments and lack of due diligence by the assessing authority. By following the precedent set in these cases, the Tribunal decided to quash the assessment in the present case as well.

Application of Mind by the Assessing Authority:
The Tribunal's decision to quash the assessment was based on the principle of ensuring that the assessing authority applies its mind properly and verifies all information before making additions or reassessments. By emphasizing the need for diligence and accuracy in assessments, the Tribunal upheld the importance of legal procedures and fair practices in tax matters.

In conclusion, the Tribunal allowed the assessee's appeal, quashing the assessment due to the non-application of mind by the Assessing Officer and following the precedent set in similar cases where assessments were invalidated for similar reasons.