The Income Tax Appellate Tribunal, Ahmedabad, has in a recent appeal filed before it by the assessee, held that no addition can be made when a notice is issued by the Assessing Officer (AO) based solely on borrowed satisfaction.
The aforesaid observation was made by the Tribunal when the assessee, leasing, and finance ltd. The company, being aggrieved by the order of the Commissioner of Income Tax (Appeals)-1, Ahmedabad (‘CIT(A)’) vide Appeal No. CIT(A)-1/ITO, Wd-1(1)(1)/09/2015-16, filed an appeal before it.
The underlying issue of the appeal is the question as to whether the C1T (A) has erred on the facts and in law, in upholding the action of the Assessing Officer with regard to the notice issuance u/s 148,as well as in making consequential reassessment u/s 147, the Tribunal while partly allowing the assessee’s appeal, observed as follows:
“In this case, the learned AO received information from the Investigation Wing that a so-called purchase of property by the assessee was a purely sham transaction and the loss claimed by the assessee on the sake of the said property on a later date was an artificial loss created by the assessee in its books of account to take the advantage of set-off of loss against the income earned by the assessee.
But nowhere has the AO applied his own mind before issuing the notice and to arrive at the conclusion that the assessee has escaped an income, and on the basis of the report submitted by the Investigation Wing, the learned AO issued notice purely on borrowed satisfaction. In our considered opinion, in such case addition cannot be made.”
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