ITAT quashed reassessment on the basis of borrowed belief of Anti-Corruption Bureau without applying mind
In a recent judgment, ITAT Ahmedabad has quashed reopening order as the Assessing Officer had reopened the case on the basis of borrowed belief of Anti-Corruption Bureau without applying his mind to the information received.
ABCAUS Case Law Citation:
5010 (2026) (01) abcaus.in ITAT
The case of the appellant assessee was reopened on the basis of letter received from Anti-Corruption Bureau regarding registration of offence under Prevention of Corruption Act, against the father of the assessee and his family members.
As per the information received, the assessee had deposited large amount of cash in his bank account. Further the assessee had also paid large amount of cash to purchase right in land by way of agreement to purchase.
The case of the assessee was reopened by issue of notice under section 148. In the course of assessment, the AO was not satisfied with the explanation of the assessee regarding the source of cash deposit in the bank account as well as the source of cash payments for purchase of immovable property.
Therefore, the entire amount were added to the income of the assessee. The assessment was completed u/s 147 r.w.s 144B of the Act. The CIT(A) vide the impugned order dismissed the appeal of the assessee.
Before the Tribunal, the assessee submitted that the case of the assessee was reopened on the basis of information received from ACB regarding disproportionate asset of a family member. However, no details of any disproportionate asset was received and such details were not supplied to the assessee. He submitted that the disproportionate asset, if any, was acquired by family member and not by the assessee. Therefore, there was no merit in reopening the case of the assessee on the basis of the information of disproportionate asset acquired by his family member.
According to the assessee, the investment in the immovable property was made out of income and there was no information available with the AO for escapement of any income earned by the assessee.
The assessee further submitted that an identical action was taken in the case of one of the family member and the Co-ordinate Bench of the Tribunal had held in that case that the reopening done in that case was invalid. He also relied upon the decision of the Coordinate Bench. On merits also he submitted that no addition was called for as the assessee had duly explained the source of the cash deposits in the bank account as well as the source of cash payments for purchase of immovable property.
The Tribunal noted that the reason recorded by the AO revealed that the AO had simply reproduced the information received from the ACB and no mind was applied to elicit as to how the income of the assessee had escaped assessment. Though the disproportionate asset amount was mentioned in the reasons, it had not been specified as to in what particular form / asset, this amount was invested. The details of disproportionate assets have not been brought on record in the reason.
The Tribunal further observed that the AO had mentioned net cash deposit and cash payments for purchase of property, but there was no mention of the underlying asset. No particulars were specified in the reason, which was found to be based on borrowed satisfaction only.
The Tribunal noted that as per allegation of ACB, all the disproportionate assets appearing in the name of the family members were acquired out of unaccounted/illegal earning of assesee’s father. This being the status, the proceeding for escapement of entire income invested in the disproportionate assets, including those invested in the name of family members, should have been initiated in the case of his father only.
The Tribunal noted that an identical reopening was done in the case of brother of assessee which was decided by the Co-ordinate Bench by holding that the AO had failed both, to identify the income of the assessee which had escaped assessment and to apply his mind to the information in his possession while forming belief of escapement of income.
Considering the facts of the case and following the decision of the Co-ordinate Bench of the Tribunal, the ITAT held that the jurisdiction assumed by the A.O. to reopen the case of the assessee was invalid. The AO had reopened the case on the basis of borrowed belief of ACB without applying his mind to the information received. Further, no inquiry was carried out to find out the nature of disproportionate asset, which was attributed to the assessee by the ACB for the impugned year. There was nothing on record to suggest that AO had made any effort to cross check and verify the information contained in ACB report, in any manner.
Accordingly, it was held that the reopening was not in accordance with law. Therefore, the order passed by the AO u/s 147 r.w.s. 144B of the Act was held as invalid and was quashed.
Download Full Judgment Click Here >>
- Reassessment on basis of borrowed belief of Anti-Corruption Bureau quashed
- In considering disallowance u/s 40A(2) genuineness of expenditure not relevant issue
- Expression “Yes I am satisfied” in approval u/s 151 not a vital defect – ITAT
- Section 143(1) Intimation not an order for Revision u/s 264 of Income Tax Act
- PCIT with jurisdiction over non corporate assesee can’t transfer corporate assessee’s case
