The assessing officer (AO) reopened the assessment based on the ...

Tax Tribunal Upholds Reopening of Assessment for Income Discrepancies, Validating AO's Reasoning on Income Escapement.

September 18, 2024

Case Laws     Income Tax     AT

The assessing officer (AO) reopened the assessment based on the difference between the purchase amount shown by the assessee and the sales amount shown by the party from whom purchases were made. The Commissioner of Income Tax (Appeals) [CIT(A)] held that the AO's reasons for reopening, "needs to be verified," were outside the purview of section 147. However, the Income Tax Appellate Tribunal (ITAT) disagreed with the CIT(A)'s conclusion. The AO specifically mentioned that Rs. 1,68,24,239/- was required to be taxed in the assessee's hands and that the assessee had suppressed gross profit, leading to an escapement of income. Although the AO mentioned verification in certain parts, the reasons must be read in totality. The ITAT was convinced that the AO had properly recorded the satisfaction regarding escapement of income, and the mere mention of "verification" did not vitiate the entire reasons. The Supreme Court's decision in Raymond Woollen Mills Ltd. laid down that the sufficiency or correctness of the material is not to be considered at this stage; one only needs to see whether there was prima facie satisfaction based on some material. The ITAT held that the CIT(A) erred in concluding that the AO was not justified in taking recourse to section 147 merely for verification purposes.

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