Mere Mention of Sale and Estimated Gain, No Tangible Material Linking Deceased CFO to Escaped Income: ITAT Invalidates Reopening [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) quashed the reassessment proceedings against the legal heir of a deceased CFO, ruling that the reopening of assessment under Section 147 of the Income Tax Act, 1961, lacked tangible material linking the assessee to the alleged escaped income.

Seema Swami, the assessee and legal heir of Late Shri Manoj Kumar Swami, a Chartered Accountant and CFO of IHHR Hospitality Pvt. Ltd., challenged the validity of reassessment proceedings for the Assessment Year 2008-09. The original assessment was completed under Section 143(3), determining total income at Rs. 93.36 lakhs.

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The Assessing Officer (AO) issued a notice under Section 148 based on an alleged gain of Rs. 6.80 crores from the sale of agricultural land, claiming it had escaped assessment. In response, the assessee filed objections and requested the reasons for reopening. The AO's reasons merely stated the occurrence of a land transaction and estimated gain, without disclosing the source of information, details of the land, or evidence connecting the assessee to the capital gains.

The assessee’s counsel argued that no tangible material was provided, and the reopening was based purely on assumptions. The assessee’s authorized representative relied on the Bombay High Court’s decision in Hindustan Lever Ltd. v. R.B. Wadkar, which emphasized that recorded reasons must be specific, self-contained, and show a direct link between evidence and belief of income escapement.

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The bench comprising M. Balaganesh (Accountant Member) and Yogesh Kumar U.S. (Judicial Member) observed that the AO failed to conduct any inquiry before forming the belief and had not recorded any credible reason supported by facts or documentation.

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The tribunal held that the reopening was jurisdictionally invalid due to the absence of tangible material forming a live link to escaped income. The tribunal ruled that such speculative belief could not justify reopening an already concluded assessment.

The ITAT quashed the reassessment proceedings and allowed the appeal, rendering other grounds academic.

To Read the full text of the Order CLICK HERE

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