ITAT Nullifies Reopening of Income Tax Assessment as Reason to belief was quite shady and Hasty Decision was Made

The Income Tax Appellate Tribunal (ITAT Delhi) in the matter of ACIT vs Sh. Ravi Parkash Aggarwal has Nullified Reopening of Income Tax Assessment as Reason, Information Referred was quite shady; Hasty Decision was Made.

Ravi Parkash Aggarwal, the assessee, has submitted a return of income declaring the entire income. Due to the search undertaken under Section 132 of the Income Tax Act of 1961, a notice under Section 153A has been issued to the taxpayer. The assessee filed a letter requesting that the return filed under section 139(1) be considered as a return filed in response to a notice issued under section 153A. The assessment was completed by adding an assessed income.

The AO mentions so as to reopen the case, it was established that BL Jain Group was providing accommodation entries of unsecured loans and bogus purchases. Then, he goes on to mention that it is established from the report that the assessee has taken accommodation entries and hence he has reasons to believe that the income has escaped assessment.

The Coram find that the reasons recorded by the assessee are too sketchy and do not instill any confidence with regard to the reasons recorded for reopening. It is not even clear whether the assessee has received entries pertaining to loans or purchases. The details of the report wherein it was alleged that the assessee has received bogus entries could not be made as a basis for reopening. The existence of belief has to be bonafide and has to be based on material that is relevant hence specific in nature. The basis of the belief should be discernable from the facts on record and ascertainable with regard to the escapement of income.

The Appellate Tribunal ruled out that “In this case, a regular assessment u/s 153B(1) has also been completed on 31.03.2014. The reasons, in the instant case recorded by the AO, do not satisfy the requirements of Section 148 of the Act. The reasons and the information referred is extremely scanty and sudden jump to the conclusions. There is no reference to any specific document except the Annexure which cannot be regarded as material or prima facie evidence to establish the link to point out escapement of income. The Annexure is not a pointer and does not indicate escapement of income per se. Hence, going through the reasons recorded of the AO on 10.10.2014 and the judicial pronouncements mentioned above, in the absence of any tangible material to establish the escapement of income for assessment, we hold that the action of the AO issuing the notice u/s 148 cannot be held to be legally valid.”

Since, at the outset, the reopening has been held to be invalid, we refrain to adjudicate on the merits of the case. As the result, Cross Objection of the assessee is allowed and consequently, the appeal of the Revenue is dismissed.

The Judgment was made by Sh. Amit Shukla, Judicial Member and Dr. B. R. R. Kumar, Accountant Member.

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