Re-assessment proceedings merely based on information received from Investigation Wing invalid

Re-assessment proceedings merely based on information received from Investigation Wing invalid

CA Ayushi Goyal | May 21, 2022 | Views 25429

Re-assessment proceedings merely based on information received from Investigation Wing invalid

Re-assessment proceedings merely based on information received from Investigation Wing invalid

The assessee filed return of income on 28.09.2010 declaring total income of Rs.3,74,820/-. The case was processed u/s 143(1) of The Income tax Act, 1961 (The Act). Director of lnvestigation-11, Mumbai have unearthed huge accommodation entry racket being operated by accommodation entry operator Sh. Bhanwarilal Jain Group by way of many companies/ firm etc. The investigation wing has complied a report & data of the beneficiaries of such entries. The name of the assessee figures in the list of beneficiaries who have taken accommodation entries of bogus purchases. The report clearly indicates that accommodation entries have been taken to plough back uncounted black money for the purpose of business or for personal needs such as purchase of assets etc ., in the form accommodation entries of bogus purchases and even describes the modus operandi of this scam . Thus, the assessee has ploughed back unaccounted money of Rs.57.39 Lakhs in its business through the channel of accommodation entry . The assessee has also paid commission on the same. Therefore, it is failure on the part of the assessee to disclose fully arid truly all. material facts necessary for its assessment , for the assessment year 2010-11. In view of the above facts, AO had reasons to believe that income to the tune of Rs.57.39 Lakhs of the assessee company for A. Y. 2010-11, has escaped assessment.

Before ITAT, the assessee submitted the assumption of jurisdiction u/s 147 of the Act is void ab initio as there was no “satisfaction” drawn by the Assessing Officer. The ld. DR argued that the “satisfaction” of the AO is apparent from the “reasons recorded” by the AO.

ITAT in its order stated that there is no live link presented by the AO between the material available with him i.e . the report of the investigation and to reason to belief that the assessee has tried to evade the assessment for the particular year in question. Simply stating and doubting that the assessee is involved in obtaining accommodation entries without providing proof, reason, information to back-up the claim cannot be considered as a valid reason to issue notice u/s 148 of the Act. There is no independent application of mind that could be deciphered from the reasons recorded. There is no reference to examination of the returns filed and whether the entries taken or on account of bogus capital, a balance sheet item or on account of bogus sales or purchases on account of revenue account. As per the record and the reasons recorded, no enquiries have been conducted by the Assessing Officer to come to a conclusion or reasons to belief with regard to evasion of tax which has escaped assessment. It relied on the decision of Hon’ble jurisdictional.

Delhi High Court in the case of Pr. CIT Vs. Meenakshi Overseas (P) Ltd. 395 ITR 677, G&G Pharma 384 ITR 147, Sabh Infrastructure 398 ITR 198 and Pr . CIT Vs. RMC Potyvinyl (I) Ltd. 396 ITR 5 wherein the Delhi High Court has held that observations of the Investigation Wing should not be treated as conclusions without the AO independently verifying the same , in the absence of which the Hon’ble Court held that the reopening of assessment was bad in law. Hence, ITAT quashed the assessment proceedings u/s 148 of the Act.

To Read Judgment Download PDF Given Below:

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