Reassessment proceedings cannot be resorted to only to examine the facts of a case, no matter how desirable that be unless there is a reason to believe, rather than suspect, that an income has escaped assessment.
Income Tax Appellate Tribunal, New Delhi
ITA No.3052/Del./2013 (AY:2004-05)
M/s. Excellent Land Developers Pvt. Ltd vs. DCIT
Date of Judgment/Order: 17/03/2016
Brief Facts of the Case:
The return of the assessee was processed u/s 143(1) of the Act. Later on, the case was reopened u/s 147 of the Act and notice u/s 148 was issued. The reasons for reopening was information from the Investigation Wing Delhi that the assessee has received Rs.29,87,040/-. Based on the above facts, the Assessing Officer (AO) recorded that he had reasons to believe that the income of the assessee chargeable to tax escaped assessment because of the failure on part of the assessee to disclose its income fully and truly.
The ITAT observed that the words “reason to believe” are wide in their import, it cannot include a mere suspicion or ipse dixit of the AO. What is required to be examined is not the adequacy or sufficiency of the grounds but the existence of belief.
It held that the AO acted in a mechanical manner and on assumption and presumption and without application of mind in initiating the proceedings u/s 147 on mere suspicion and non-existent belief and fact which had no nexus or link for formation of belief of escapement of income .
Excerpts from the Judgment:
We take note that the reasons recorded in M/s. Sarthak Securities Ltd. and compare the same with assessee’s case, we find that the reasons recorded in M/s. Sarthak Securities Ltd. was on a better footing than that of the reasons recorded by the AO in order to reopen the assessment in assessee’s case. With this observation, let us examine the reasons recorded by the AO dated 31.03.2011 on a standalone basis, we take note that all that the reasons recorded for reopening indicate is that assessee received Rs.29,87,040/-. It is elementary that all receipts are not income. There is no whisper in the reasons recorded that the assessee has routed his money through any fictitious company. Merely stating that Rs.29,87,040/- has been received by assessee cannot by any stretch of imagination satisfy the condition precedent as laid by the Hon’ble Apex Court and Hon’ble jurisdictional High Court in a plethora of cases as cited above. The case of the assessee is that on a perusal of the balance sheet of the company which was filed along with the return of income it was clearly reflected that Rs.29,87,040/- was received by the assessee company on sale of shares of M/s. Shiv Shakti Town Developers Limited which were sold through M/s. Sino Credit and Leasing Ltd. to M/s. York Leasing and it was duly disclosed as sale consideration. Thus, we find that there is no new material on record to entertain a belief that assessee’s own money was routed through M/s. Sino Credit and Leasing Ltd. as an accommodation entry. The fact of receiving the said amount as sales consideration was before the AO during the original assessment which cannot be termed as fresh tangible material for the assessment year under consideration, when the same receipt was disclosed in the balance sheet of the assessee which was filed along with ROI. Taking a case for scrutiny u/s 143(3) is the department’s choice and if an AO does not do his job at the original assessment then it cannot be a justification for AO to reopen, which will be giving premium to an AO who failed to do his job properly, which cannot be allowed. Further, the reasons recorded for reopening the assessment do not make out a case that the assessee had suppressed any material factor or misguided the AO during original assessment though u/s 143(1). As we do not have the liberty to examine these reasons on the basis of any other material or fact, other than the facts set out in the reasons so recorded, it is not open to us to deal with any other material when we examine the reasons on a standalone basis to look in to the question as to whether the income has escaped assessment. The Assessing Officer has made a bald statement that income has escaped assessment of income because of the failure on apart of the assessee to disclose its income fully and truly without even going through the original assessment u/s 143(1) of the Act and overlooks the fact that the assessee had filed the audited balance sheet wherein the sale consideration of shares of Rs.29,87,040/- was reflected. So, what the AO has done was once he got a letter from Investigation wing that some amount has been received by the assessee, the AO immediately resorted to reopening u/s 147 which is not allowed by law. Of course, it may be desirable, from the point of view of revenue authorities, to examine the matter in detail, but then reassessment proceedings cannot be resorted to only to examine the facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that an income has escaped assessment.