ITAT invalidates Reopening of Income Tax Assessment as reasons, information referred was extremely Scanty, Sudden jump to conclusions [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has invalidated Reopening of Income Tax Assessment as reasons, information referred was extremely scanty, sudden jump to conclusions.

The assessee, Ravi Parkash Aggarwal has filed return of income declaring total income. Owing to the search conducted u/s 132 of the Income Tax Act, 1961 notice u/s 153A has been issued to the assessee. The assessee filed a letter that the return filed u/s 139(1) may be treated as return filed in response to notice under section 153A. Assessment was completed by making an addition at an assessed income.

The AO mentions so as to reopen the case, it was established that BL Jain Group was providing accommodation entries of unsecured loan and bogus purchases. Then, he goes on to mention that it is established from the report that the assessee has taken accommodation entries and hence he has reasons to believe that the income has escaped assessment.

The coram of Judicial Member, Amit Shukla and Accountant Member, Dr. B. R. R. Kumar held that the reasons recorded by the assessee are too sketchy and does not install any confidence with regard to the reasons recorded for reopening. It is not even clear whether the assessee has received entries pertaining to loans or purchases. The details of the report wherein it was alleged that the assessee has received bogus entries could not be made as a basis for reopening. The existence of belief has to be bonafide and has to be based on material which is relevant hence specific in nature. The basis of the belief should be discernible from the facts on record and ascertainable with regard to the escapement of income.

“In this case, a regular assessment u/s 153B(1) has also been completed on 31.03.2014. The reasons, in the instant case recorded by the AO do not satisfy the requirements of Section 148 of the Act. The reasons and the information referred to are extremely scanty and sudden jump to conclusions. There is no reference to any specific document except the Annexure which cannot be regarded as material or prima facie evidence to establish the link to point out escapement of income. The Annexure is not a pointer and does not indicate escapement of income per se. Hence, going through the reasons recorded of the AO on 10.10.2014 and the judicial pronouncements mentioned above, in the absence of any tangible material to establish the escapement of income for assessment, we hold that the action of the AO issuing the notice u/s 148 cannot be held to be legally valid,” the ITAT said.

To Read the full text of the Order CLICK HERE

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