Difference between the reasons to believe not to be mistaken with reasons to suspect while reopening assessment u/s 147

Dove Consultants Pvt. Ltd. vs DCIT; ITA No. 1197/Del./2019; 29.09.2021; ITAT Delhi

The appeal was filed against the order of the Commissioner of Income-tax (Appeals)-03, New Delhi , qua the assessment year 2009-10.

Facts:

• During the year under consideration, the assessee company was engaged in the business of electrical contractor. The return of income declaring income of Rs. 59,93,110/- was filed by the assessee on 27.09.2009 and processed u/s 143(1) of the Income Tax Act, 1961.
• Thereafter the assessment was reopen u/s 147 read with section 148 of the Income Tax Act, and the impugned addition of Rs. 59,19,233/- was made by the Assessing Officer in the assessment framed u/s 147 / 143(3) of the Income Tax Act.
• The addition made by the assessing officer has been confirmed by the Ld. CIT(A). Being aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.

Observations:

• The Assessing Officer had only an information that the assessee M/s. Dove Consultants Pvt. Ltd. has made a transaction with M/s. Bhola Trading Company. However, there was no reliable information that the said transaction was a sham transaction. The assessee admittedly is engaged in the business of 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, ledger account of M/s. Bhola Trading Company in the books of assessee company was reflecting the aforesaid transaction of Rs. 2,36,76,932/-. The purchase invoices were also produced before the investigation wing. The Assessing Officer further mentioned about 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. The assessee in this respect has submitted that the assessment year under consideration is AY 2009-10 and the assessee’s income as per the reasons recorded has considerably increased. The sales / consumption of the material by the assessee has also not been doubted by the Assessing Officer. 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.
• It has been held time and again 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.

Held:

• The Bench did not find any justification on the part of the assessing officer for reopening of the assessment. The same being bad in law, the consequential assessment made by the assessing officer was quashed.

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