AHINSHA MANAGEMENT PVT. LTD.,KOLKATA vs. ITO, WARD-4(3), KOLKATA

The only issue raised in ground no.1 is against the order of ld. CIT (A) upholding the reopening of assessment u/s 147 of the Act, overlooking the fact that the conditions precedent for assumption of jurisdiction under section 147 were not fulfilled and therefore, the assessment framed u/s 147/ 144 of the Act is void ab initio, ultra virus and nullity in the eyes of law.

In the appellate proceedings, the ld. CIT (A) also dismissed the appeal of the assessee. The ld. AR at the outset submitted that the case of the assessee has been invalidly reopened u/s 147 of the Act when necessary, conditions precedent for reopening being not fulfilled and satisfied. The ld. AR while referring to page no.66 of the paper book submitted in the reasons recorded by the ld. AO, he nowhere stated that when the money was received and from whom it was received and after reproducing the investigation wing report in the last para simply noted that ‘I have reason to belief that income of the assessee chargeable to tax has escaped assessment and thus, it is fit case for invoking the provisions of Section 147 of the Act’ and accordingly, proposal was submitted to the ld. PCIT, Kolkata for his kind approval. The ld. AR submitted that the ld. AO has acted on the borrowed satisfaction and there is no independent application of mind to the facts of the case. The ld. AR therefore in defence of his arguments relied on the decision of Hon’ble Delhi High court in the CIT vs. Insecticides (India) Ltd. (2013) 38 taxmann.com 403 (Delhi) and prayed that the reopening of assessment may kindly be quashed.

After hearing the rival contentions and perusing the materials available on record, we find that the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act. The assessee did not comply with the said notice by filing the return of income. We have perused the reasons recorded for reopening of assessment u/s 148(2) of the Act, the copy of which is available at page no. 66 of the paper book, which revealed that the ld. AO after extracting the report of the investigation, simply recorded in three lines that I have reason to believe that assessee’s income chargeable to tax has escaped assessment, meaning thereby the ld. AO has not recorded his satisfaction and reasons are vague, unambiguous and scanty. We note that no details/information have been recorded as from whom the money was received and when it was received. In our opinion the re-assessment can be not be made on vague, scanty and ambiguous reasons recorded. The case of the assessee is squarely covered by the decision of Hon’ble Delhi High court in the CIT vs. Insecticides (India) Ltd. (supra). Further, it is a case borrowed satisfaction and non-application of mind by the ld. AO too. We observe that the ld. AO has simply, after extracting the report from the investigation wing, noted that income of the assessee has escaped assessment. For the sake of ready reference, the reasons recorded are extracted below: -

It is apparent from the above that there is no satisfaction or independent application of mind by the ld. AO to the information received. Moreover, the reasons are vague, scanty and ambiguous. Therefore, we are inclined to quash the reopening of assessment. Consequently, the appeal of the assessee is allowed.

Since, we have allowed the appeal of the assessee on legal issue i.e. reopening of assessment being invalid and nullity in the eyes of law, the other grounds raised by the assessee on legal issue as well as on merits are not being adjudicated at this stage and are left open if the need arises for the same at a later stage.

The issues raised in this appeal are similar to ones as decided by us in A.Y. 2009-10. Accordingly, our decision, would apply mutatis mutandis to this appeal of assessee in as well. Hence, the appeal of assessee is allowed.

In the result, both the appeals of the assessee are allowed.