ITAT Quashes reassessment proceedings framed on  information received from DDIT due to Non Application of mind by AO [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Mumbai bench quashed reassessment proceedings framed on information received from the DDIT due to non application of mind by the assessing officer.

The assessee, Ankur Power Projects Pvt. Ltd is engaged in the business of production, collection and distribution of electricity. After completing the regular assessment of the assessee accepting the loss declared by the assessee.

When the DDIT, Jodhpur had conducted a search in the case of M/s. Varah Infra Group of Jodhpur and it was found that the said company and its group were providing accommodation entries in the form of investments in share capital of various other companies located in Kolkata,

Based on the said search, the DDIT informed the assessing officer that the assessee herein is one of the beneficiaries of accommodation entries. As per the said information, the assessee has also taken accommodation entries in the form of security premium to the tune of Rs. 64.11 crores during the financial year 2010-11. 

under consideration by sending notice in accordance with section 148 of the Act after obtaining the aforementioned information. The Assessing Officer reopened the assessment and determined that the assessee's income consisted of unexplained cash credit of Rs. 66.24 crores, which included share premium of Rs. 64.11 crores and share capital of Rs. 2.13 crores.

Aggrieved, the assessee filed further appeal before the CIT( A ) who upheld the validity of validity of reopening of the assessment also confirmed the additions made under section 68 of the Act towards unexplained cash credit. Thereafter the assessee filed a second appeal before the tribunal.

Neelkanth Khandelwal,Counsel for assessee argued that Assessing Officer has not arrived at the satisfaction about the escapement of income in the hands of the assessee in an independent manner as contemplated under Section 147 of the Income Tax Act, i.e. the Assessing Officer has simply accepted the information given by the Investigation Wing and concluded that there was escapement of income without making any independent enquiry.

Hence there was no proper and independent application of mind by the Assessing Officer on this escapement and hence the reopening of assessment is bad in law.

N.V. Nadkarni , Counsel for Revenue,relied upon the order passed by  CIT( A ) on this issue.

The tribunal observed that the Under section 147 of the Act, it is mandatory that the assessing officer should have reason to believe that any income chargeable to tax has escaped assessment.

In the present case the reasons recorded by the AO  would show that the assessing officer has only narrated the information shared by DDIT and the allegations made by the said authority that the assessee has taken accommodation entry. After that, the AO simply states that he has reason to believe that income chargeable to tax has escaped.

Therefore the tribunal after analyzing the facts concluded that AO has not examined this vital aspect while forming belief that there was escapement of income, which also goes to show that there was complete non-application of mind on the part of the assessing officer.

After reviewing the facts and records, the two-member bench Of B.R. Baskaran ( Accountant member ) and  Pavan Kumar Gadale ,( Judicial Member )  quashed reassessment proceedings framed on information received from the DDIT due to non application of mind by the assessing officer.

Therefore the bench allowed the appeal filed by the assessee.

To Read the full text of the Order CLICK HERE

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