The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) has invalidated a reassessment order as the Assessing Officer’s sole reliance on DDIT report for the alleged 15 crore income escapement was deemed insufficient.
The Revenue in its appeal challenged the order of the CIT( A ) in restricting addition to Rs.29 lakhs as against Rs.02,28,08,450/- on account of unexplained investment in construction of house property.
The counsel for the assessee Mr. Rano Jain submitted that the assessment was proposed to reopen on the ground that no return of income has been filed by the assessee for the year under consideration when in fact the assessee had filed return of income on 31.03.2010 declaring taxable income of Rs.1,96,190/-.
Further submitted that except stating that the assessee has invested more than 15 crores nothing has been stated in the reasons to co-relate the statement. The reasons do not specify in which property the assessee has invested more than 15 crores in the reasons specified.
It was also submitted that the AO has no material evidence except report of the DDIT and the AO has initiated the proceedings on the basis of that report and assessment was framed by referring the matter to the Valuation Cell to find out the investment made by the assessee in the property which goes to show that neither the AO has any material nor has rationale belief for issuing notice under Section 148 of the Income Tax Act.
Mr. Anuj Garg representing the revenue strongly supported the orders of the Assessing Officer in reopening the assessment. He submitted that the Assessing Officer has reopened the assessment based on the information received from DDIT, wherein it was stated that the assessee has invested more than 15 crores in construction of house in Rohtak.
The bench noticed that the statement in the reasons that assessee had not filed return of income for the AY 2009-10 is factually incorrect, as the assessee filed return of income on 31.10.2010 declaring taxable income of Rs.1,96,190/-.
It was also noted that AO is of the belief that income of more than 15 crores has escaped assessment based on an information of DDIT( Inv. ) that the assessee had invested more than 15 crores in construction of house in Rohtak. In the reasons recorded, the AO has not given any details as to how the income more than 15 crores has escaped assessment. Nothing in the reasons specified as to how the escapement of income has been arrived at more than 15 crores
Furthermore, it was noted that the rationale behind the alleged 15 crore figure was not elucidated in the reasons provided. The assertion merely stated that the assessee’s income had escaped assessment by over 15 crores, lacking any specific details that were purportedly outlined in the DDIT report.
Consequently it was observed that the reasons furnished in this instance could only be construed as grounds for suspicion, falling short of the requisite threshold for justifying the reopening of assessment under Section 148 of the Income Tax Act.
The bench of G.N Pannu ( Vice President ) and C.N.Prasad ( Judicial member ) held that the reassessment made in the section 143(3) read with section 147 of the Act is bad in law and the re-assessment order was quashed, Accordingly, the appeal of the Assessee are allowed.
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