Mere adoption of information from Officer of investigation wing of Income Tax Dept cannot be characterized as bonafide belief of AO in absence of cogent material: ITAT quashes order of CIT(A)

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) he that alleged information from other officer of the dept. has to be reckoned as abstract, ba and bare one and thus has no rational probative value and could not be acted upon by the AO under law.

The assessee-company is a brokerage house engaged in the services of commodities. The assessee has inter alia executed transactions towards commodities trading on by using National Multi-Commodity Exchange (NMCE) platform through certain brokers and sub-brokers. The assessee filed its return of income on 29.07.2010 declaring total income at Rs.26,49,495/- concerning Assessment Year 2010-11 in question. The return filed was assessed under Section 143(1) of the Act.

Subsequently, on the basis of certain information received from investigation wing of the deptt, the re-assessment proceedings were initiated and the notice under Section 148(1) was issued on 31.03.2017 to assume jurisdiction for re-assessment under Section 147 of the Act. The reassessment proceedings under Section 147 were completed vide reassessment order dated 22.12.2017 after making additions to the extent of Rs.4,49,62,850/-.

Aggrieved, the assessee preferred appeal before the CIT(A). Before the CIT(A), the assessee challenged the action of the Assessing Officer both on (a) lack of jurisdiction under S. 147 of the Act as well as (b) lack of merits in additions carried out by the AO. The CIT(A) did not see any merit in the challenge to jurisdiction assumed by the AO under S. 147 of the Act and endorsed the assumption of jurisdiction for reassessment of income. Aggrieved, the assessee appealed before the tribunal.

After hearing both the parties, the tribunal he that in the absence of material, the alleged information from other officer of the deptt. has to be reckoned as abstract, ba and bare one and thus has no rational probative value and cou be acted upon by the AO under law. The AO is duty bound to test the alleged information himself in the light of relevant material and weigh the credibility of information and consequently disclose his ‘process of reasoning’ to arrive at the ‘reason to belief’ contemplated under section 147. The appraisal of the material needs to be carried out by the AO and none other.

The two member bench consisting of Chandra Mohan Garg (Judicial member) and Pradip Kumar Kedia (Accountant member) he that they find overwhelming potency in the plea of the assessee that reasons recorded and approval granted thereon under Section 151 do not meet the requirement of law at all and thus the issuance of notice under Section 148 based on cryptic and nondescript reasons combined with a mechanical approval of the CIT that too on a narrow compass under Section 151 is not permissible in law. Thus the order was quashed and the appeal of the assessee was allowed.

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