Re-Assessment merely on direction from Superiors is Invalid

By CA Sandeep Kanoi Income Tax Judiciary November 15, 2017

TaxGuru Citation: 2017 taxguru.in 1141
Case Name: Asst. Commissioner of Income- tax Vs. M/s Gayatri Agro Industrial Power Ltd. (ITAT Hyderabad)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Related Assessment Year: 2002- 03 & 2003- 04
Courts: All ITAT, ITAT Hyderabad

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ACIT Vs. M/s Gayatri Agro Industrial Power Ltd. (ITAT Hyderabad)

It is clear from the record that AO has initiated reassessment proceedings only on the direction of ACIT and, moreover, AO has defended the case before audit parties. It gives an impression that AO was satisfied and believed that the original assessment was proper and the assessee has merit in its claim as per the return of income. Only on the behest of internal communication and direction from superiors, he has initiated reassessment It clearly shows that the AO has not applied his mind independently to initiate the proceedings u/s 147 and not recorded the satisfaction before initiating the proceedings. We are bound by the decision of the coordinate benches that AO has not recorded proper satisfaction before initiating proceedings u/s 147. Accordingly, we follow the decision in the case of Keerthi Industries Ltd., (supra) wherein the coordinate Bench has decided the issue, under similar circumstances as in the present case, as under:

“8. Considering the submissions of both the counsels and material facts on record, we find that the AO had reopened the assessment on the ground that the waiver of loan by the bank has escaped assessment. The same was pointed out in the audit objection. We have perused the audit objection and the reasons recorded by the AO for reopening the assessment. No doubt, on record the reasons recorded by the AO are based on his own reasons of view, but, the same was indulged on findings of the audit objection raised by the audit party as it can be considered as it will fall in the similar situation as held in the case of CIT Vs. PVS Beadies (supra). But as the findings recorded by CIT, the timings of the correspondence of Addl. CIT, which is dated 13/03/20 13 and timings of the notice u/s 148, which was issued on 26/03/20 13 clearly shows that the reopening was done on the behest of the Addl. CIT. It clearly shows that the AO had not applied his mind independently even though the reasons recorded on the basis of the factual error pointed out by the audit party. The reasons for reopening an assessment need to be based on tangible material which has a live-link with the formation of the belief that there was an escapement of income. For this proposition, CIT relied on the decision of the Hon’ble Supreme Court in the case of CIT Vs. Kelvinator of India Ltd., 320 ITR 561. Therefore, we do not find any infirmity in the order of CIT(A) in quashing the reopening of assessment made by the AO u/s 147 of the Act. Accordingly, ground No. 2 is dismissed.”