On discovering that the need of application of mind is not in the instant case, the Delhi ITAT ruled that the reassessment incurred in section 143(3) read with section 147 of the Income Tax Act, 1961, is poor in law and therefore, the re-assessment order is suppressed.
ITAT said that no independent application of mind via AO is there on the tangible materials and reasons and the AO is missed to demonstrate the live link between tangible material and the building of reason to acknowledge that income escaped assessment.
The Bench of the ITAT comprising of G.S. Pannu (Vice President) and Challa Nagendra Prasad (Judicial Member) followed that, “In the reasons recorded the AO has not given any details as to how the income more than 15 crores has escaped assessment. Nothing in the reasons specified as to how the escapement of income has been arrived at more than 15 crores. There is no live link between the reasons recorded and the materials on record when the reasons were recorded. The only basis on which the reasons recorded by the AO was based on the DDIT(Inv.) report and the AO has not even given the details of the report which is the basis for reopening of assessment to believe that there is escapement of income of more than 15 crores.” (Para 9)
According to the brief facts of the matter, the assessment was asked to reopen on the foundation that no income return has been furnished via the taxpayer for the year beneath consideration when the taxpayer’s point has furnished the income return.
The assessment was opened again on the foundation of the data obtained via the DDIT which mentions that the taxpayer has invested more than 15 cr in the house construction.
The statement that mentions that the taxpayer has not furnished the income return is factually wrong since the taxpayer has furnished the same via declaring the taxable income, the bench observed.
While referring to the decision of the Delhi High Court in the matter of Pr. CIT vs. RMG Polyvinyl (I) Ltd., (2017) 396 ITR 5 (Del.) the bench noted that the facts received from the Investigation Wing cannot stated to be tangible material per se without the additional inquiry being performed through the AO and the AO underprivileged himself of that opportunity by proceeding on the wrong premise that taxpayer had not filed a return when in fact it had.
The Bench repeated at the time of referring the decision of the Gujarat High Court in the matter of Vijay Harishchandra Patel vs. ITO (2018) 4 (Guj.) (HC), “In the reasons recorded, the Assessing Officer had based his belief on the fact that the assessee had not filed any return due to which there was an escapement of income on account of sale of immovable property.
The Assessing Officer, instead of dropping the assessment proceedings, by an order rejecting the objections filed by the assessee, had sought to proceed with the reassessment proceedings on afresh ground which was not found in the recorded.
When the original ground for reopening the assessment did not survive, the Assessing Officer had sought to proceed further with the assessment on totally different grounds, which was impermissible.”
AO does not dispute that the taxpayer has furnished the income return bench notice. Under such fact a factual inconsistency in reopening the assessment that the taxpayer does not furnish the income return.
For the provided reasons, AO believes that the income escaped assessment merely based on the report of the DDIT(Inv.) that the income had escaped exceeding 15 crores.
The Bench also noted that what is the basis for 15 crores is not established in the reasons. It is just a poor statement that the taxpayer’s income has escaped assessment for exceeding 15 crores without furnishing any details which are to have been given in the DDIT report.
Accordingly, the reasons recorded in the current case at most pleasing can be ministered to be a reason to question which is not adequate for reopening the assessment under section 148.
Thus on determining that AO has losses to show the live link between the tangible material and making of reason to consider that the income has escaped the assessment, the petition of the revenue has been dismissed by the ITAT.
| Case Title | ITO verses Surender Dalal |
| Case Number: | I.T.A No.7714/Del/2019 |
| Date | 30.01.2024 |
| Counsel for Appellant/Department: | Anuj Garg |
| Counsel for Respondent/Taxpayer: | Rano Jain |
| Delhi ITAT | Read Order |
