ITO Vs Gujarat Storages P.Ltd. (ITAT Ahmedabad)
As far as banking transactions are concerned, these details were available with the AO. This information was given in the audited accounts. Any transactions shown in the bank statement could never be construed per se as an escaped income. It is the AO who has to form his opinion as to how the transaction appearing in the bank account could be treated as escaped income. There is no logical analysis of the information received from the DGIT (Investigation) establishing the direct nexus between the information vis-à-vis escaped income available in the hands of the assessee. He simply made reference to the information and then believed that some income must have been escaped, and therefore, a detailed investigation regarding the banking entries requires to be made. For that purpose, he should have selected the case for scrutiny assessment by issuing notice under section 143(2) of the Act. For the purpose of section 147, he has to be very specific as to how fresh information came into his possession establishing a live-link between the escapement of income vis-à-vis this information. No such things are available in the reasons, therefore, to our mind, the ld.first appellate has appreciated the facts in right perspective, and rightly quashed reopening of the assessment. We do not find any error in the order of the ld.CIT(A). Accordingly, this appeal of the Revenue is dismissed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
Revenue is in appeal before the Tribunal against order of the ld.CIT(A)-2, Ahmedabad dated 27.6.2016 passed for Asstt.Year 2007-08.
2. Though the Revenue has taken three grounds of appeal, but its solitary grievance is that the ld.CIT(A) has erred in quashing reassessment order passed under section 147 read with section 143(3) of the Income Tax Act, 1961 on the ground that reopening is bad in the eyes of law.
3. Brief facts of the case are that the assessee is a private limited company. It has filed its return of income electronically on 5.11.2007 declaring total income at Rs.26,008/- which was processed under section 143(1) on 11.1.2009. According to the ld.AO, DCIT (Investigation) Mumbai has transmitted certain information exhibiting the fact that the department has conducted various search and seizure operations wherein it revealed that one Shri Praveen Jain was providing accommodation entries and the assessee is the beneficiary of such accommodation entry. Accordingly, he recorded reasons for reopening the assessment and issued notice on 27.3.2014. In response to the notice, the assessee filed reply dated 16.4.2014 submitting therein that original return filed by it be treated as filed in response to the notice issued under section 148 of the Income Tax Act. The ld.AO thereafter issued notice under section 143(2) and 142(1) of the Act. He ultimately, held that the assessee has obtained accommodation entry which are reflected in its books of accounts, and accordingly made addition of Rs.2,22,50,000/-. He determined taxable income of the assessee at Rs.2,20,76,008/- as against Rs.26,008/- declared by the assessee.
4. In appeal, the assessee has challenged reopening of the assessment before the ld.first appellate authority. The ld.CIT(A) after recording detailed reasoning held that the AO has erred in reopening the assessment. He has not provided any satisfactory reasoning for taking action under section 147 of the Act. The ld.CIT(A) did not adjudicate the issue on merit, though noted down arguments of the assessee, but ultimately held that since he has quashed the assessment order on the preliminary jurisdictional issue, there is no necessity to examine the issue on merit. The department in its appeal has submitted that the ld.CIT(A) ought to have upheld the reopening and ought to have adjudicated the issue on merit.
5. With the assistance of the ld.representatives, we have gone through the record carefully. For appreciating the aspect, whether the AO has rightly reopened the assessment or not, it is imperative upon us to take note of reasoning assigned by the AO. Such reasons have been reproduced by the ld.CIT(A) in para-2.5 of the impugned order. It reads as under:
“Please refer to the above. The reasons recorded for reopening of the assessment in your case for the A. Y 2007-08 is as under:-
“In this case, it has been found that the assessee company has filed its return of income for A. Y. 2007-08 on 15/11/2007. The return of income was duly processed u/s. 143(1) of the I. T. Act, 1961.
On receipt of the written instructions from the DG(IT) (Inv.), Mumbai vide letter dated 07/03/2014 and forwarded by the DIT (Inv.), Ahmedabad vide their letter dated 12/03/2014, wherein it has been noticed that in case of certain companies, Accommodation entries have been provided by Shri Praveenkumar Jain. One of the assessee company, Viz. Gujarat Storage Limited bearing PAN : AABCG 7431 K had entered into bank transactions as follows, which needs further verification:
