The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) in Urvish B. Mehta versus I.T.O, quashed the reopening since the ‘reason to suspect’ cannot be a ground of reason to re-open assessment.
During the Assessment proceedings, the assessing officer concluded that assessee has received some bogus purchase entries from thirteen parties and not making any purchase of actual goods or service and the case was re-opened under section 147 of the Act pursuant to the notice under section 148.
Assessee had contested the issue of notice and re-opening of assessment before assessing officer. Assessing officer stated that the said bogus purchase entries were downloaded from the sales tax department website. Finally, after considering the contentions of assessee, AO framed assessment and addition under section 69C.
Being aggrieved assessee carried the matter to this tribunal and reproduced the names of thirteen parties who are involved in these issues. Also, counsel for Assessee stated that AO only relied on the information received from DGIT, Mumbai which conveys that as per official website of the Sales Tax Department appellant has made bogus purchases of goods from thirteen parties who are engaged in issuing bogus bills only without supplying any materials.
Counsel for the Assessee argued that AO should have take an independent enquiry before issuing said notice which has not been done which shows the absence of independent application of mind by the Assessing Officer.
The Assessee prayed for quashing the re-opening of assessment since the AO failed to establish the reason to believe that income has escaped assessment and made several statements which establish that AO falsefully reopened the assessment based on invalid information.
On the counter part, the counsel for Revenue contended that said thirteen suppliers admitted that they were giving bogus entries on commission basis without giving any goods or services.
The Mumbai bench comprising judicial member Mahavir Singh and Accountant member Rajesh Kumar heard the rival submission and perused the records also bench pressed the decision of Apex court that the power of ITO to re-open the assessment is not plenary and absolute, and the words of statute are “reason to believe” and not “reason to suspect”. But here only the AO has “reason to suspect” and not “reason to believe”.
Accordingly, the bench quashed the re-opening and held that ‘reason to suspect’ is not a criteria to re-open assessment.