Cryptic Reasons, Borrowed Satisfaction: ITAT Kolkata Quashes Reopening as Void

The assessee company filed its return of income for AY 2013–14, declaring a loss of Rs.15,00,000. The assessment was reopened by the Assessing Officer by issuing notice under Section 148 on 06.05.2020, based on information received from the Investigation Wing alleging receipt of Rs.10,00,000 from Radharani Vyapaar Pvt. Ltd. The assessee filed return in response to the notice, reiterating the originally declared loss. The reassessment proceedings culminated in an order under Section 147, which was upheld by the NFAC.

The assessee challenged the reopening itself as invalid, contending that the reasons recorded were vague, mechanical, and based on borrowed satisfaction without independent application of mind.

Main Issue: Whether reassessment proceedings under Section 147 are valid when the recorded reasons are cryptic, non-speaking, and based solely on investigation wing information without independent satisfaction of the Assessing Officer.

ITAT’s Verdict: The Tribunal held that the reasons recorded by the Assessing Officer were wholly deficient, as they merely reproduced information received from the Investigation Wing without demonstrating any independent application of mind or a live nexus between the material and the belief of escapement of income. The Tribunal found the reopening to be based on borrowed satisfaction, rendering the notice under Section 148 and the later reassessment proceedings void ab initio. It was further noted that even the show cause notice did not name the assessee as a beneficiary of the alleged transactions.

Relying on multiple judicial precedents, including PCIT v. Meenakshi Overseas Pvt. Ltd., the Tribunal quashed the reassessment. The appeal of the assessee was thus allowed.

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