Reopening of assessment cannot be permitted merely on the ground of Survey

Dy. CIT Vs. Dr. M.J. Naidu (ITAT Visakhapatnam)

On perusal of the reasons recorded it is evident that the assessing officer has recorded very vague and reasons which are general in nature. No specific material, which indicated the escapement of income was brought on record. Similarly defects if any in the books of accounts maintained by the assessee was also not mentioned. No specific items of income or the receipts which escaped from income was brought on record in reasons, leave alone the quantum. For both the assessment years, the reasons are identically worded, leaving the assessment year blank for guess work of the assessee. Surprisingly the same reasons were recorded in both the cases of M. Madhavi and Dr. M.J. Naidu. The assessing officer has not mentioned any material which was impounded in the case of the assessee indicating escapement of income. No finding was given by the assessing officer with regard to the overstatement of expenditure, understatement or suppression of the receipts, suppression of any assets or overstatement of liability which leads to escapement of income. From plain reading of the reasons recorded by the assessing officer shows, that the reasons were recorded, without application of mind and merely because the survey was conducted and the assessing officer wants to reopen the assessment without having any tangible material. It is settled issue that even in the cases where the assessments were completed under section 143(1), for reopening of the assessments, there should be reason to believe that the income has escaped assessment. There is a vast difference between the issue of notice under section 143(2) and notice issued under section 148. For reopening the assessment and issue of notice under section 148, the assessing officer should have a reason to believe that the income chargeable to tax has escaped assessment. For having a reason to believe there must be tangible material which indicates income escaped assessment. Mere suspicion, or the surmises or merely because of survey is conducted the assessing officer is not permitted to reopen the assessment. There should be strong belief based on material is required for reopening the assessment under section 147. Suspicion or guess work is not sufficient to reopen the assessment under section 147 of the Income Tax Act. Though the statements were recorded and the material was impounded the assessing officer did not mention specifically which part of the statement and what material impounded constitutes basis for formation of reasonable belief for escapement of income in the reasons recorded. The nexus of the statement recorded and the impounded material for escapement of income was not brought on record in the reasons. Even the assessing officer did not mention the assessment year and it was left blank which shows the casual attitude of the assessing officer in reopening the assessment. The assessing officer cannot improve the reasons already recorded, subsequently by referring to the books of account or the explanations.

Justification for reopening the assessment has to be tested only on the strength of recording reasons for reopening the assessment under section 148. Recording of proper reasons and the application of mind is necessary which must be bona fide and not in mechanical manner. Where the notice issued without application of mind on the part of the assessing officer, the same is liable to be quashed. The reasons recorded by the assessing officer must disclose the process of reasoning by which he hold the reason to believe that the income chargeable to tax has escaped assessment for the relevant assessment year. The material relied upon by the assessing officer should appear on the record. In the instant case, it is clear that the assessing officer has recorded vague and general reasons without application of mind. The assessing officer did not establish or whisper from the reasons recorded regarding the escapement of any income. It appears from the reasons recorded that assessing officer has reopened the assessment merely because survey was conducted in this case which is not permissible in law.