In a recent decision the Bombay High Court observed that debits and credits can in no way lead to an inference of income escaped assessment.
The petitioner, Digi1 Electronics Pvt Ltd, challenged the notice issued under section 148 of the Income Tax Act, 1961 by seeking to reopen the assessment, on the basis of ‘his reason to believe’ that income chargeable to tax for the assessment year 2016-17 had escaped assessment within the meaning of section 147 of the Income Tax Act.
The Petitioner is engaged in the business of trading in electronic appliances and has filed its returns on a regular basis and even for A.Y.2013-14.
Dharan Gandhi the Counsel for the Petitioner submitted that the Assessing Officer (AO) has failed to establish that the jurisdictional conditions are satisfied to initiate reassessment proceedings and submitted that the reassessment is based solely on the information received under the head High-Risk Transaction cases under the verification module on the “INSIGHTS PORTAL”.
The Counsel further submitted that there is no live link or nexus between the information received and the purported income i.e. escaped assessment and that there is no information or detail about the nature of the transaction or account which is signed, the sine qua non for the AO to have a “reason to believe” that income chargeable to tax has escaped assessment.
Suresh Kumar, Counsel for the respondent submitted that the information on the “INSIGHT PORTAL” from the Financial Intelligence Unit of the Government of India is tangible and concrete information and that new tangible information was received in relation to the suspicious transactions from the Financial Intelligence Unit.
The Court of Justices Kamal Khata and Dhiraj Singh Thakur observed that “we find no new tangible material as contended by the respondents. Debits and Credits can in no way disclose the nature of transactions or lead to an inference of income escaped assessment. Cash deposits from various places cannot be doubted to be considered suspicious transactions. In our view, there is no prima facie case made out that income has escaped assessment.”
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