The Delhi bench of the ITAT comprising Shri R. K. Panda, Accountant Member and Shri N. K. Choudhry, Judicial Member has held that the re-assessment under section 147 and 148 of the Income Tax Act, 1961 cannot be held valid in the absence of an independent inquiry by the Assessing Officer who merely relied on the information received from the investigation wing to conclude the proceedings.
The Assessing Officer, on receiving information from the office of the ADIT(Investigation), Faridabad has held that M/s. Neelkanth Steel, Faridabad has made bogus sales to the tune of Rs. 25 lakhs, which escaped to tax in the hands of the Assessee, reasons qua concealment of income were recorded by the AO and the case of the Assessee was reopened by issuing notice dated 30.03.2017 under section 148 of the Act which remained un-complied.
The two-member bench observed that demonstration of the link between the tangible material and the formation of the reasons to believe that income had escaped assessment is necessary for reopening the case under section 147/ 148 of the Act and the information received from the Investigation Wing cannot be said to be a tangible material per se without further inquiry being undertaken by the AO.
“The conclusion of the AO, based on the investigation report indeed is a borrowed satisfaction. The Hon’ble High Court also held that it is established principle of law that if a particular authority has been designated to record his/her satisfaction on a particular issue, then it is that authority alone who should apply his/her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction recorded should be “independent” and not “borrowed” or “dictated” satisfaction,” the bench said.
Quashing the assessment order stating that the same is bad in law, the Tribunal held that “Admittedly in this case, the AO while recording reasons for selection of the case, neither made any enquiry qua the information dated 14.03.2017 of the ADIT, Investigation, Faridabad nor made any effort to find out the veracity and authenticity of information and any corroborative evidence/material thereto, but only acted on the information while forming belief qua escapement of the income and initiation of proceedings u/s 147/148 of the Act, without connecting tangible material and the formation of the reasons to believe for escapement of income.”
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