Addition merely based on Information from Investigation Wing on the basis of Justice M B Shah Commission report not Valid: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the addition made by the income tax department merely on the basis of the information from the investigation wing based on the report of Justice M B Shah Commission is invalid.

The appellant-assessee is a listed public limited company engaged in the business of mining bauxite and selling the same in domestic as well as international market. The assessee was aggrieved by an order of the Assessing Officer who re-opened the assessment under section 147 and 148 of the Income Tax Act, 1961on the basis of the report of Justice M B Shah Commission. The Assessing Officer made an addition by observing that the assessee-appellant has under invoiced the export of iron core to the extent of Rs 11,04,27,609.

Before the appellate authorities, the assessee contended that except the communication from Director General of Income Tax (Investigation) Kolkata regarding the tax invoice on the basis of the above report.

The assessee approached the Tribunal on the second appeal after failed to secure a favorable order from the first appellate authority.

Allowing the appeal, the Tribunal observed that the above information was not sufficient to re-open assessment against the assessee.

“The material facts of the present case being identical inasmuch as the reopening, beyond any doubt or controversy, is entirely based on the Hon’ble Justice M B Shah Commission report, as in the case that Hon’ble Bombay High Court was dealing with, the ratio of the aforesaid judgment clearly applies on the facts of this case. As a plain look at the reasons recorded for reopening the assessment, as also for the approval by the Additional Commissioner of Income Tax, the only basis for reopening of the present assessment, as in the judgment cited above, was a report submitted by Hon’ble Justice M B Shah Commission report. Respectfully following the binding judicial precedent, extracts from which are extensively reproduced above, we must hold that the initiation of reassessment proceeding itself, on the facts of this case as evidenced by the reasons recorded by the Assessing Officer, is unsustainable in law. We, therefore, quash the reassessment proceedings,” the Tribunal said.