Case Law Details
Vikas Chowdhary Vs ITO (ITAT Delhi)
It is well settled law that validity of the reassessment proceedings is to be determined on the basis of the reasons recorded for reopening of the assessment. The reasons are reproduced above. The AO as per NMS information which was pushed into the ITD system came to know that assessee has made transactions amounting to Rs. 107.89 crores with National Multi Commodity Exchange. No return has been furnished by assessee. The AO, therefore, deemed that income chargeable to tax assessment in a sum of Rs. 1 lakh or more has escaped assessment. The AO, however, in the assessment order has clearly mentioned that he has also called for information from MCX u/s 133(6) of the IT Act intimating that assessee has suffered loss of Rs. 16,747/-. Thus, assessee did not earn any income or profit from MCX transaction. The loss suffered by assessee out of MCX transaction could never be considered as income chargeable to tax has escaped assessment. The AO did not refer to this statement in the reasons recorded for reopening of the assessment. The AO has not brought any tangible material on record which gives rise to believe that income has escaped assessment. The AO merely on hypothecation of figures estimated that there is a deemed escapement of income of the amount which is likely to amount Rs. 1 lakh or more. No exact amount of income escaping assessment has been mentioned in the reasons for reopening of the assessment. No bank statement or any tangible material or report of investigation conducted u/s 133(6) has been mentioned in the reasons. The AO merely presumed that since assessee did not file the return of income, therefore, there is a deemed escapement of income. This fact is also incorrect and non-existing because the authorities below have accepted in the impugned orders that ultimately assessee has suffered loss of Rs. 16,747/- in MCX transaction in the assessment year under appeal. Thus, assessee was not required to file the return of income u/s 139 of the Act in respect of the loss suffered by assessee in assessment year under appeal. Section 149(1)(b) of the Act provides that “no notice u/s 148 shall be issued for relevant assessment year, — if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to Rs. 1 lakh or more for that year”. The AO in the present case, based his reasons for reopening of the assessment as per NMS information pushed into ITD system and information called u/s 133(6) from MCX. None of these information have provided if assessee has earned income of Rs. 1 lakh or more. Rather it merely provides the amount of the transaction conducted by assessee on MCX and ultimately assessee suffered loss in MCX transaction, therefore, there was no reason for the AO to believe that income chargeable to tax for Rs. 1 lakh or more have escaped assessment. Thus, the conditions of section 149(1)(b) of the Act are not satisfied in the present case. It is condition precedent before invoking jurisdiction u/s 147/148 of the Act that the AO has reason to believe that income chargeable to tax has escaped assessment for any assessment year. However, in the present case, there is no material what to say of tangible material is available on record to establish that AO has reason to believe if income chargeable to tax has escaped assessment. The information of loss receipt from MCX was not deliberately mentioned by the AO in the reasons. Thus, the AO did not have any definite material or information to record/reasons that there is an escapement of income in the case of the assessee. The AO recorded incorrect and non-existing facts in the reasons recorded for reopening of the assessment. The AO did not apply his mind to the material on record before recording reasons for reopening of the assessment. The AO also failed to verify the information so received due to non-application of mind, therefore, reopening of the assessment would be unjustified and is liable to be quashed.
FULL TEXT OF THE ITAT JUDGEMENT
This appeal by assessee has been directed against the order of Ld. CIT(Appeals)-12, New Delhi dated 30.10.2019 for AY 2011-12, challenging the reopening of the assessment u/s 147/148 of the IT Act and addition of Rs. 11,49,060/- u/s 69 of the IT Act.
2. I have heard Ld. Representatives of both the parties through Video Conferencing and perused the material on record.
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