ASHOK KUMAR BOTHRA & SONS,NEW DELHI vs. ITO, WARD- 36(4), NEW DELHI

On the facts and circumstances of the case, the order passed by Ld CIT (A) is bad both in eyes of law and on facts.

That the Ld. CIT(A) erred in law as well as fact by passing the order without taking into consideration the details and evidences submitted by the applicant.

That the AO has erred in law and fact as well by initiating penalty proceedings u/s. 271(1)© of the Act.

That the appellant reserves the right to add, modify, alter, amend or delete any of the grounds.

The brief facts of the case are that the assessee e-filed the return of income for A Y 2009-10 on 24.03.2010 declaring an income of Rs.1,78,275/-. The case of the assessee was re-opened under section 148 of the Income Tax Act, 1961 on the basis of information received by ADIT (Inv) unit-1(3) Ahmedabad vide dated 18.03.2016 in respect of Client Code Modification (CCM) Dissemination of beneficiary client who have taken contrived losses and shifted out profit of Rs..11,56,570.75 during the FY 2008-09. Before the AO, the assessee has submitted that no transaction took place with the alleged broker and that the total income of the assessee during the year including the exempt income was Rs.1,78,275/-. In replies dated 17.06.2016 and 12.12.2016, the assessee shared all the DMAT details alongwith bank statements for FY 2007-08 and FY 2008-09. In order to clarify the allegations, the assessee requested the A.O. for a cross examination, which was never arranged. A perusal of the reasons recorded by the AO clearly show that the AO has simply acted upon the information received from the Investigation Wing and did not apply his own mind to the said information. Being aggrieved the assessee carried the matter to the Ld. CIT(A), who vide his impugned order dated 28.3.2018 has upheld the action of the AO by holding the opening of assessment proceedings as valid and also on merit confirmed the addition in dispute. Against the impugned order 28.3.2018, assessee is in appeal before the tribunal.

During the hearing, Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that without prejudice even if reliance is placed on the alleged account statement of the broker, no profit/income has been earned by the asseesee during the above period and hence, no addition is called for even on merit. The Ld. Counsel for the assessee further submitted that the reasons recorded do not show any application of mind nor the same show any belief independently arrived at by the AO, which is the basic pre-requisite for issuing notice u/s 148. AO made addition purely on the basis report received from investigation team and without applying his mind. Therefore, in view of the above circumstances and further considering the settled position of law in this regard, the reassessment proceedings initiated by the AO are without due application of mind, and thus, the reassessment proceedings should be quashed as such. Further, the AO‘s order shows that this may at best be a ‘reason to suspect’ & not ‘reason to believe’. Only on the basis of reason to suspect, reopening cannot be done. Therefore, the addition made by the AO and sustained by the ld. CIT(A) was not justified and needs to be deleted.

In his rival submissions, the ld. DR strongly supported the orders of the authorities below.

In the result, the Appeal filed by the Assessee stands allowed