The Delhi bench of the ITAT has quashed the re-assessment proceedings holding that the information received from the Investigations Wing or AIR cannot be said to be a tangible material per se without further inquiry being undertaken by the AO.
The AO while recording reasons for selection of the case on the basis of AIR information observed that the Assessee has deposited cash of Rs. 44,00,500/- in his S.B. Account during the F.Y. 2008-09 and therefore issued a verification letter dated 30.10.2015 to the Assessee who failed to respond the same, therefore inference was drawn by the AO that the source of deposit in saving bank account remained unexplained as the Assessee has not filed return of income for the A.Y. 2009-10. Accordingly, the re-assessment proceedings were initiated against the assessee.
The Tribunal bench comprise of Shri Anil Chaturvedi, Accountant Member and Shri N. K. Choudhry, Judicial Member observed that it was the bounden duty of the Assessee to comply with verification letter issued by the AO, which the Assessee deliberately disregarded and therefore in the absence of return of income, the AO had rightly drawn the inference that source of deposit in saving bank account remained unexplained and this fact goes against the Assessee.
“The conclusion of the AO, based on the Investigation Report or AIR information indeed is a borrowed satisfaction,” the Tribunal said.
Holding the order as invalid, the Tribunal held that “however considering the peculiar facts and circumstances of thecase, as the AO except issuing verification letter to the Assessee, has not made proper efforts to find out the veracity and authenticity of information and any corroborative evidence/material thereto and without connecting tangible material and the formation of the reasons to believe for escapement of income but only acted on the information while forming belief qua escapement of the income and initiation of proceedings u/s 147/148 of the Act, we are of the considered opinion that the reasons recorded in the instant case are insufficient, vague and based on unsubstantive reasoning, uncorroborated material and lack of evidence and hence tantamount to be based on borrowed satisfaction and accordingly does not sound valid reasons in the eyes of law, for reopening of the case.”
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