ITAT quashes Reopening of Assessment Due to Lack of Live Nexus between Reasons Recorded and Belief Formed by the Assessing Officer [Read Order]

The New Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed the reopening of Assessment due to lack of live nexus between reasons recorded and belief formed by the Assessing Officer.

The assessee company, M/s Amrit Bakewell Products Pvt. Ltd., in appeal suggest that the order passed was bad both in the eye of law and on facts, and that the Assessing Officer and CIT(A) had erred on various grounds such as non-compliance with statutory conditions, lack of live nexus between reasons recorded and belief formed by the Assessing Officer, and illegal issuance of notice under Section 148 of the Income Tax Act.

 The points of appeal also contest the addition of Rs. 25,00,000/- made by the Assessing Officer  on account of share capital and commission, and rejection of the explanation and evidence provided by the assessee. The appeal also alleges that the Assessing Officer had passed the order without affording adequate opportunity of being heard to the assessee.

Counsel for the assessee argued that the assessment has been reopened based solely on information received from the Investigation Wing, without any independent exercise by the Assessing Officer  to have a reason to believe and  it is clear that the Assessing Officer recorded incorrect and wrong facts in the reasons recorded for reopening assessment and did not apply his mind to the information received from the Investigation Wing, the reopening of the assessment is invalid and bad in law and should be quashed. 

The counsel for the revenue  strongly supported the orders of the authorities below and argues that the Assessing Officer  has considered the information received from the Investigation Wing and has subsequently formed a reason to believe that an income of Rs. 25 lakhs and a commission of Rs. 43,750/- therein have escaped assessment.

The Single Bench consisting of Judicial Member C. M. Garg observed that the Assessing Officer has acted solely on the basis of information received from the Investigation Wing without conducting an independent exercise at his own level.

The tribunal bench thus held,”The reopening of assessment under Section 147 and issuance of notice under Section 148 of the Income Tax Act are therefore invalid and should be quashed, as they are based on a borrowed satisfaction and not supported by an independent assessment by the Assessing Officer.”

Appeal for the assessee partly allowed and ordered for reopening of Assessment.

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