The Delhi Bench of Income Tax Appellate Tribunal (ITAT) ruled that the reopening of assessment cannot be made on mere suspicion in absence of any evidence alleging escapement of income during the assessment.
The assessee company, Dove Consultants Pvt. Ltd. was engaged in the business of electrical contractors. The return of income declaring income was filed by the assessee and processed under section 143(1) of the Income Tax Act, 1961. Thereafter the assessment was reopened under section 147 read with section 148 of the Income Tax Act, and the impugned addition was made by the Assessing Officer in the assessment framed under section 147 or 143(3) of the Income Tax Act.
The assessee admittedly is engaged in the business of an Electric Contractor. The assessee purchased electric cables from the said M/s. Bhola Trading Company. The Assessing Officer, however, doubted the said transaction. However, it has been noted by the Assessing Officer himself that during the investigation, the ledger account of M/s. Bhola Trading Company in the books of the assessee company was reflecting the aforesaid transaction. The purchase invoices were also produced before the investigation wing. The Assessing Officer further mentioned the gross turnover of the assessee and observed that the income of the assessee company has considerably increased from AY 2008-09 to AY 2009-10.
There is no mention of any evidence available before the AO to show that the aforesaid transaction was a bogus transaction. The assessing officer merely on the basis of suspicion observed that the aforesaid entry might be a bogus entry and that the assessee might have purchased the material from outside.
The Coram of Accountant Member, Anil Chaturvedi, and Judicial Member, Sanjay Garg ruled that there is a lot of difference between the ‘reasons to believe and ‘reasons to suspect’. That the reopening of the assessment cannot be made on mere suspicion in the absence of any reliable information or evidence to form the belief that the income has escaped assessment. In this case, there is no mention of any such reliable document/evidence which may be sufficient to form the belief that the transaction in question was a bogus transaction or that the income of the assessee had escaped assessment.
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