ITAT quashes Reassessment Proceedings as Reasons Supplied to the Assessee were different from Reasons Recorded [Read Order]

Reassessment Proceedings - ITAT - Taxscan

The Income Tax Appellate Tribunal (ITAT), Delhi Bench quashed the reassessment proceedings as reasons supplied to the assessee were different from reasons recorded.

The assessee, Jansampark Advertising & Marketing Vs. P. Ltd. filed the return of income declaring an income of Rs.3,180/-; that claiming to have received specific information from investigation wing of the Department, learned Assessing Officer recorded reasons that the assessee company had indulged in receiving accommodation entries and the total amount of payment received by the assessee company amounting to Rs. 51 Lakhs is bogus and represents the undisclosed income or income from other sources of the assessee company which was not offered to tax by the assessee and therefore, stating that the income of Rs. 51 Lacs chargeable to tax had escaped assessment, learned Assessing Officer issued notice under section 148. Assessee filed the copy of return that was already filed. After hearing the assessee, an addition of Rs. 71 lakh was made on account of unexplained credit under section 68 of the Income Tax Act, 1961 and a sum of Rs. 1.42 lakhs on account of commission at 2% in respect of the accommodation entry.

Mr. Kapil Goel, the Counsel on behalf of the assessee argued that it was brought to the notice of the CIT(A) that the reasons recorded were different from the reasons supplied to the assessee, the reasons supplied to the assessee do not contain any details as to the transaction, how Rs. 51 Lakhs was treated as accommodation entry in the hands of the assessee that could be discernible, there are no clues as to the nature of the transaction, there is no mention of any return filed earlier, there is no Annexures/statements/report enclosed with the reasons, break up of figure of Rs. 51 Lakhs is not to be found, there is no tangible material much less the Livelink between the reasons and the addition so on and so forth. He further submitted that the CIT(A) looked into this aspect, advert to the reasons supplied to the assessee by letter and also the reasons to be found in the assessment record, but recorded a finding that the reasons were properly recorded, the communication of reasons was made to the assessee at the reassessment proceedings, even in the subsequent appellate proceedings, raising any objection to the reasons recorded are to the sufficiency of material, based on which the reopening was done. He, therefore, argued that, inasmuch as the reasons recorded were not supplied to the assessee, the assessment that followed basing on such lapse is vitiated.

On the other hand, the Revenue urged that there is no change in the reasons recorded and the reasons supplied to the assessee but in the reasons supplied to the assessee are only concise or a bridge ones and no prejudice was caused to the assessee, as rightly observed by the CIT(A) and therefore it is not a ground to vitiate the assessment proceedings.

The two-member bench of Judicial Member K. Narshima Chary and Accountant Member N.K.Billaiya held that the that the requirement of recording the reasons, communicating the same to the assessee, enabling the assessee to file objections and the requirement of passing a speaking order are all designed to ensure that the Assessing Officer does not reopen assessments which have been finalized on his mere whim or fancy and that he does so only on the basis of lawful reasons, and since these steps are also designed to ensure complete transparency and adherence to the principles of natural justice, any deviation from these directions would entail the nullifying of the proceedings.

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