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Facts
The Revenue filed an appeal against the order of the CIT(A)/NFAC which quashed reassessment proceedings initiated under Section 147/148 of the Income Tax Act, 1961. The reassessment was based on information from the Investigation Wing regarding an alleged undisclosed investment of Rs. 2,86,42,500/- in an immovable property.
Held
The Tribunal held that the Assessing Officer's initiation of reassessment proceedings was mechanical and based on borrowed satisfaction without independent application of mind or verification of basic particulars. The Department failed to produce any evidence to substantiate the alleged investment.
Key Issues
Whether the reassessment proceedings initiated under Section 147/148 were validly based on a proper 'reason to believe' or were mechanical and without application of mind, and whether the addition for unexplained investment was substantiated.
Sections Cited
147, 148, 143(3), 69
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Order PER LALIET KUMAR, J.M: The present appeal filed by the Revenue is directed against the order of the Ld. CIT(A)/NFAC, Delhi dt. 24/12/2024 , for the assessment year 2015–16. 2. In the present appeal Revenue has raised the following grounds:
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in law & facts of the case, in quashing the proceedings u/s 147/148 of the Act as the AO has duly recorded the reasons to form an opinion with regard to escapement of income with the prior approval of the competent authority?
2. Whether on the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax(Appeals) has erred in law & facts of the case in deleting the addition of Rs. 2,86,42,500/- made by the AO u/s 69 of the Income-tax Act, 1961 on account of unexplained investment in immovable property?
3. That, the Ld. Commissioner of Income Tax (Appeals), NFAC has failed to appreciate that the assessee's case is covered in the passing of information received from Enforcement Directorate vide letter dated 25.01.2019.
4. That, the Ld. CIT(A), NFAC has erred in law & facts of the case in deciding the appeal in favour of the assessee without appreciating that the name of the assessee & her bank account maintained with IDBI Bank are duly reflected at Sr. No. 10 in Annexure-B of the said information passed on by the Enforcement Directorate dated 25.01.2019. 2
5. That the appellant craves leave to add or amend any ground of appeal before it is finally disposed off.
Briefly the facts of the case are that the assessee, Smt. Bhavneet Kaur Walia, was subjected to reassessment proceedings under section 147 of the Act on the basis of information received from the Investigation Wing, alleging that the assessee had made undisclosed investment of Rs.2,86,42,500/- in an immovable property during the relevant year.
3.1 During the course of assessment, the assessee repeatedly sought the details of the said investment, including the description of property, address, and particulars of seller or payment. However, the Assessing Officer failed to provide any such details either during the reassessment proceedings or thereafter. The assessment order was completed under section 147 read with section 143(3), making addition of Rs.2,86,42,500/- as unexplained investment.
Aggrieved, the Assessee preferred appeal before the Ld. CIT(A), challenging the initiation and validity of proceedings under section 147/148 as well as the addition made.
4.1 The Ld. CIT(A), after examining the assessment order and submissions of the assessee, recorded categorical findings as under:
The case of the appellant has been re-opened based on an information from the Investigation Wing. However, the Ld. A.O. has not stated the details of the property in which the appellant has allegedly made undisclosed investment amounting to Rs. 2,86,42,500/-, no details of the seller or the mode of payment or any details thereof have been put forth. The material relied upon to re-open the assessment and the additions made thereof by the Ld. A.O. have not been explained even a wee bit. The onus of providing the details of the undisclosed investment lied with the department, for this is the case of the department that the appellant has made undisclosed investment during the assessment year. It can be stated that the Ld. A.O. has simply re- opened the assessment based on the information of the investigation wing without going into checking the veracity of the passed on information. Hence, there is complete lack of application of mind on part of the Ld. A.O. The assessment order of the Ld. A.O. is completely perfunctory, ill conceived and ill thought. In view of the facts and circumstances as stated above, the proceedings u/s 147/148 are liable to be quashed. The grounds of appeal 1, 2, 6 and 8 are hereby allowed. Since, the proceedings u/s 147/148 have been quashed, the rest of the grounds of appeal become infructuous.
3 5. Aggrieved by the order of the Ld. CIT(A), the Revenue has filed the present appeal before the Tribunal.
During the course of hearing, the Ld. DR was specifically directed on the earlier date to produce the assessment record and verify the description, address, and details of the property alleged to have been purchased by the assessee. However, despite sufficient opportunity, the Ld. DR could not place on record any such document or detail to establish that any property was in fact purchased by the assessee during the relevant year.
On the other hand, the Ld. Counsel for the assessee reiterated that the Assessing Officer neither disclosed the source of information nor shared any material indicating investment in any property, rendering the reassessment based purely on borrowed satisfaction and devoid of any independent application of mind.
We have carefully considered the rival submissions, the material available on record, and the order of the Ld. CIT(A). It is not in dispute that the Assessing Officer initiated proceedings solely on the basis ofan information received from the Investigation Wing, without specifying the nature, address, or details of the property. The record also does not reveal any inquiry or verification conducted by the AO prior to issuance of notice under section 148. 8.1 It is a settled law that the Assessing Officer must apply his own mind to the material before forming a “reason to believe” that income has escaped assessment. Mere reproduction of investigation wing information without verifying its correctness constitutes mechanical reopening and vitiates the entire proceedings.
8.2 In the instant case, the absence of even basic particulars of the alleged investment demonstrates total non-application of mind. The AO neither verified ownership records nor examined bank accounts or purchase deeds to corroborate the allegation.
8.3 Even before this Tribunal, when specifically directed, the Department could not produce any evidence or material to substantiate that the assessee made any such undisclosed investment. Therefore, we find ourselves in complete agreement with the finding of the Ld. CIT(A) that the initiation of proceedings under section 147/148 was mechanical, based on borrowed satisfaction, and without any tangible material. Consequently, the reassessment order is unsustainable in law.
8.4 In view of the above discussion and the categorical findings of the Ld. CIT(A), which remain uncontroverted by the Revenue, we see no infirmity in the order of the Ld. CIT(A) quashing the proceedings under section 147/148 of the Act. Accordingly, the appeal filed by the Revenue is dismissed.
In the result, appeal filed by the Revenue is dismissed.