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2023 (12) TMI 330 - AT - Income TaxValidity of Reopening of assessment u/s 147 - reasons to believe - borrowed belief - allegation of non Independent application of mind by AO - assessee had obtained accommodation entry - HELD THAT - As on the date of recording of reasons by the Assessing Officer of the income of the assessee having escaped assessment, the only information with the Assessing Officer was that obtained from the DCIT, Central Circle-1, Rajkot, that the assessee had obtained accommodation entry from an alleged angadiya - That except for this, there was no other information with the AO and based on this information, he formed a belief that this amount represented unaccounted sales of the assessee and income to this extent had been escaped assessment. AO had made no attempt to verify whether these amounts had actually been received by the assessee and in what manner. Thus we completely agree with assessee that the Assessing Officer s belief of escapement of income was not his own belief but a borrowed belief. Jurisdiction assumed in the present case by the Assessing Officer to frame assessment under Section 147 of the Act is without valid jurisdiction. Decided in favour of assessee.
Issues Involved: Validity of assessment framed under Section 147 of the Income Tax Act, 1961.
Summary: Issue 1: Validity of Assessment under Section 147 of the Act The assessee challenged the validity of the assessment framed under Section 147 of the Income Tax Act, 1961, arguing that the belief of escapement of income was not that of the Assessing Officer (AO) but was a borrowed belief from the DCIT, Central Circle-1, Rajkot. The AO formed the belief based on information that the assessee had taken accommodation entries during the year without verifying the information himself. The Tribunal noted that the AO had received information from the DCIT that M/s. National Shroff & Co. had given the assessee cheque/DD of Rs. 20,75,100/-, which was believed to represent unaccounted sales. However, the AO did not verify this information from the assessee's records or conduct any inquiry before forming the belief of escapement of income. The details of the amount received were obtained only after recording the reasons for reopening the case, and even then, no verification was done. The Tribunal agreed with the assessee that the AO's belief of escapement of income was a borrowed belief, as the AO had not independently verified the information. The Tribunal cited various court decisions, including those from the Karnataka High Court and ITAT Visakhapatnam Bench, which held that the belief of escapement of income must be that of the AO and cannot be based on borrowed belief. Conclusion: The Tribunal held that the jurisdiction assumed by the AO to frame assessment under Section 147 of the Act was invalid, as it was based on borrowed belief. Consequently, the assessment framed was quashed, and the appeal of the assessee was allowed. Other grounds raised by the assessee on merits were deemed academic and not adjudicated. Order Pronounced: The appeal was allowed, and the order was pronounced in the open Court on 03/10/2023 at Ahmedabad.
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