YOGESH GUPTA,NEW DELHI vs. ITO, NEW DELHI

Whether the Ld. CIT(A) was justified by upholding not only the alleged Rs.400000/-but the entire addition to capital a/c of Rs.2850000/- u/s 68 without considering the evidence on record or bringing any contrary material/rebuttal on record to draw any adverse inference. That the appellant craves leave to amend, alter or to raise any other ground at the time of hearing.”

The main grievance of the assessee relates to the reopening of the assessment by exercising the powers u/s Yogesh Gupta 147 of the Income Tax Act, 1961 (hereinafter referred to as the Act).

Facts of the case in brief are that the assessee filed his return of income on 17.09.2002 declaring an income of Rs.2,05,830/- which was processed u/s 143(1) of the Act on 29.01.2003. Thereafter, the AO received the information from the Investigation Wing and reopened the assessment by issuing the notice u/s 148 of the Act. The assessee had received two gift cheques of Rs.2,00,000/- each from Sh. Mukesh Kumar Jindal who was alleged to have been engaged in giving bogus gifts, loans and share capital after taking cash and issuing cheques to the beneficiaries. The AO during the course of assessment proceedings noticed that in the bank statement of account no. 16767 maintained by the assessee with Oriental Bank of Commerce, it was found that the cheques amounting to Rs.28,50,000/- (including cheques of Rs.4,00,000/- received from Sh. Mukesh Kumar Jindal) were credited during the year. The AO held that the genuineness of the gifts and the creditworthiness of the donors could not be proved. He, therefore, made the addition of Rs.28,50,000/-.

In compliance to the said direction the AO proceeded to frame the assessment. The assessee raised preliminary objection of reopening which the AO disposed off vide order dated 05.12.2011. The AO again framed the assessment at an income of Rs.30,55,830/- by repeating the earlier addition of Rs.28,50,000/-.

Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted that the AO was not justified to reopen the assessment without any valid and proper reasons. The ld. CIT(A) did not find merit in the submissions of the assessee and observed that there was apparently no scrutiny assessment in this case and the AO was within his rights to issue notice u/s 148 of the Act on the basis of sufficient informations in his possession.

In his rival submissions the ld. DR strongly supported the orders of the authorities below and further submitted that the ld. CIT(A) was not justified in upholding the reopening of assessment. Therefore, the reopening was justified.

We have considered the submissions of both the parties and perused the material available on the record. In the present case, it is noticed that the AO in the body of the assessment order dated 29.12.2011 noted as under: “The return of income was filed by the assessee on 17.09.2002 declaring income of Rs.2,05,830/- for the AY 2002-03 which was processed u/s 143(1) on 29.01.2003. Thereafter information was received from the Investigation Wing. On the basis of this information the case of the assessee was reopened after recording the reasons and necessary prior approval was sought from the competent authority. Notice under section 148 was issued and served upon the assessee.”

From the above notings of the AO, it is crystal clear that the reopening u/s 147 r.w.s 148 of the Act was done only on the basis of the information received from the Investigation Wing and the AO did not apply his independent mind to come to the conclusion that the income of the assessee escaped assessment.

On a similar issue the Hon’ble Jurisdictional High Court in the case of Principal Commissioner of Income Tax- 4 Vs G & G Pharma Ltd. (supra) vide order dated 08.10.2015 (now reported at 384 ITR 147) held as under: “The basic requirement of law for reopening an assessment is application of mind by the Assessing Officer, to the materials produced prior to reopening the assessment, to conclude that he has Yogesh Gupta reason to believe that income has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materials produced subsequent to the reopening will not make an inherently defective reassessment order valid.” It has further been held as under: “Without forming a prima facie opinion, on the basis of such material, it was not possible for him to have simply concluded that it was evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries. The basic jurisdictional requirement was application of mind by the Assessing Officer to the material produced before issuing the notice for reassessment. Without analysing and forming a prima facie opinion on the basis of material produced, it was not possible for the Assessing Officer to conclude that he had reason to believe that income had escaped assessment.”

In the present case also the AO simply acted upon the information received from the Investigation Wing and did not apply his own mind. Therefore, the reopening u/s 147 by issuing the notice u/s 148 of the Act only on the basis of information received from the Investigation Wing was not valid. Accordingly, the reassessment framed by the AO is held to be invalid and quashed.