Non-Application of mind by AO could not be a ‘Reason to Believe’ to justify Reopening of Assessment: ITAT [Read Order]

AO - Reopening of Assessment - ITAT - Taxscan

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) ruled that the non-application of mind by the Assessing Officer (AO) could not be a ‘Reason to Believe’ to justify the Reopening of Assessment.

The assessee, M/s R N Khemka Enterprises (P) Ltd. challenged the validity of reassessment proceedings. It was argued that the provisions of section 153C are applicable to the facts of the present case and not 147. It was also argued that the reassessment proceedings were made without applying independent mind by the AO and the reopening was merely based on the report of the Investigation Wing. It was also argued that the reasons recorded do not contain the name of the so-called entry provider, the important details in form of instrument number through which cheques/RTGS were accepted by the assessee company, name of the bank from which the accommodation entries were provided, the name of the bank in which the accommodation entries were credited and the date of transaction etc.

The assessee also challenged the validity of reassessment proceedings on the ground that the AO assumed jurisdiction by issuing notice under section 143(2) of the Act and supplied the reasons after that which means the AO assumed jurisdiction before allowing the assessee to file objections for the assumption of jurisdiction.

It was argued that the information/report from the Investing Wing is not a gospel truth as held by the AO without applying his independent mind. Further, the approving authorities have approved the reassessment proceedings in a mechanical manner without due application of mind. Relying on various decisions, it was submitted that such approval given by the higher authority does not demonstrate the due application of mind, and therefore, such reassessment proceedings are invalid.

The Coram of Judicial Member, Suchitra Kamble and Accountant Member R.K. Panda in line with the decision of the Delhi High Court in the case of Mastech Technologies Pvt Ltd. vs DCIT quashed the  Reassessment Proceedings on the grounds that the AO assumed jurisdiction to make an assessment by issuing notice under section 143(2) of the Act before supplying reason which means that the AO assumed jurisdiction before allowing assessee to file an objection to assumption to jurisdiction.

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