Mere Suspicion without Valid Reason not sufficient to Initiate Reassessment: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) Delhi Bench, has recently, in an appeal filed before it, held that mere suspicion without valid reason is not sufficient to initiate reassessment.

The aforesaid observation was made by the Tribunal when an appeal was filed before it by an assessee as against the order dated 31.01.2019 of the CIT(A), Ghaziabad, relating to Assessment Year 2010-11.

The grounds of the assessee’s appeal being that on the facts and circumstances of the case, CIT (A) has erred in confirming the action of  A.O in framing the impugned reassessment order u/s 147/144 and that too without assuming jurisdiction as per law and without complying with the mandatory conditions u/s 147 to 151 as envisaged under the Income Tax Act, 1961, C.M. Garg, the Judicial Member of the Tribunal observed :

“when we evaluate the reasons recorded by the AO in the present case, it is amply clear that the sole basis was AIR information that the assessee has deposited cash of Rs.48,40,685/- in his savings bank account and the AO framed an opinion that the said deposit was the income of the assessee which escaped assessment.”

“While doing so, he did not apply his own mind and initiated reassessment proceedings. Thus, I safely presume that the AO has acted only on the basis of suspicion, so it cannot be said that it was based on the belief that income chargeable to tax has escaped assessment”, he added.

“I may also point out that the AO had noted contradictory facts in the prescribed form and reasons recorded regarding filing of return by the assessee for AY 2010-11 supports the contention of the ld. Counsel that initiation of reassessment proceedings has been done without application of mind.”, the Judicial member further noted.

 Thus, allowing the assessee’s appeal he concluded:

“Considering the totality of the facts and circumstances of the case and respectfully following the ratio laid down by various pronouncements including the order of ITAT Chandigarh Bench in the case of Gurdish Kaur Khullar, I am of the view that the reassessment proceedings initiated by the AO on the basis of suspicion without having valid reason and on the basis of prima facie belief that income has escaped assessment for AY 2010-11 are not valid. Thus, the ld.CIT(A) was not justified in sustaining the same”.

To Read the full text of the Order CLICK HERE

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