Prima facie belief that there is Escape of Income is sufficient proof to Re-Open Assessment: ITAT [Read Order]

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The Income Tax Appellate Tribunal (ITAT), Pune bench presided by S.S.Godara, Judicial Member held that prima facie belief that there is the escape of income is sufficient proof to initiate reassessment proceedings under section 147/148 of the Income Tax Act, 1961.

The assessees’, Sanjay Sadashiv Navale pleadings challenge the correctness of the learned lower authorities’ action invoking section 148/147 mechanism. The Counsel for the respondent, Arvind Desai submitted that Assessing Officer (AO) had duly found the assessee’s taxable income to have escaped assessment which has culminated in the impugned addition(s). I find no merit in the Revenue’s instant arguments. This is for the reason that the Assessing Officer has mainly gone by the fact that the cash deposits made at the assessee’s behest “cannot be explained” from the known sources of income of the assessees’ from the return of income filed and other evidence(s) available on record whereas these taxpayers turned out to be non-filers only. Such non-application of mind in recording reasons does not deserve to be concurred. The Counsel relied on the judgment in Meenakshi Overseas Pvt. Ltd. Vs. CIT and Hindustan Lever Ltd. vs. R.B. Wadkar, submitted that the reopening reasons have to be read on a standalone basis without any scope of addition, deletion or substitution therein even if supportive material emerges at a later stage.

The Tribunal observed that “Undoubtedly, at the stage of recording the reasons for reopening the assessment, all that is necessary is the formation of prima facie belief that an income has escaped the assessment and it is not necessary that the fact of income having escaped assessment is proved to the hilt. What is, however, necessary is that there must be something which indicates, even if not establishes, the escapement of income from assessment. It is only on this basis that the Assessing Officer can form the belief that an income has escaped assessment.”

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Sanjay Sadashiv Navale vs DCIT

Counsel for Appellant:   Shri Suhas Bora

Counsel for Respondent:   Shri Arvind Desai


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