The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT), invalidated assessment by the Assessing Officer (AO) on the ground that there is no nexus between information and belief of escapement of income. The assessee in the appeal is M/s. Bhavi Leasing & Finance Ltd.
The counsel for the assessee contended that while information in the possession of the AO was regarding unaccounted money of Pradip Overseas Ltd. (POL) group having been introduced in the said companies by way of share capital issued at premium and the assessee was one of the companies which had invested in these companies, on the basis of this information the AO had formed belief that income of the assessee had escaped assessment.
The Counsel pointed out that the information related to unaccounted income of POL group which was routed into it through investment by way of share capital using shell companies for the purpose. The assessee being investor, as per the information with the AO, it was only a shell company used to route unaccounted income of POL group back into it.
The income definitely was not that of the assessee but POL group and contended therefore that there was no live nexus between the information with the AO and formation of belief of escapement of income.
The assessee is an investor in the Pradeep Overseas group of companies having subscribed to share capital of two companies of POL group and there was no information regarding unaccounted income of the assessee with the AO but on the contrary the information related to unaccounted income of POL group. On the basis of this information the AO could not have possibly formed any belief of escapement of income of the assessee.
A Coram consisting of Annapurna Gupta, Accountant Member and T R Senthil Kumar, Judicial Member observed that “There being no nexus between the information in the possession of the AO and the formation of belief of escapment of income of the assessee, the jurisdiction assumed by the AO to reopen the case of the assessee and assess its income under section 147 of the Income Tax Act was in gross violation of law. The assessment so framed under Section 147 of the Income Tax Act is held to be non-est and void for this reason alone.”
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