Case Law Details
Electrotherm (India) Ltd. Vs DCIT (ITAT Ahmedabad)
Conclusion: Since AO after applying his mind on information received from VAT Department arrived at the conclusion, based on the reasons to believe that income of assessee had escaped assessment. and at the time of issuing notice under section 148 AO had formed prima facie opinion for escapement of income, therefore, reassessment was sustained as valid.
Held: AO received information from VAT Department that the bogus sale was made by certain entities after charging commission @ 0.05% from assessee. In-fact these impugned entities were not involved in the actual sale and purchase activities. AO reopened assessment and made addition. Assessee contended that proceedings under section 147 were initiated by AO without application of mind and further, there was no disallowance made by AO in the assessment framed under section 147 on account of freight expenses, despite AO had recorded the same in the reasons for escapement of income on account of such expenses. It was held that AO after applying his mind on information received from VAT Department, arrived at the conclusion based on the reasons to believe that income of assessee had escaped assessment. Further, AO at the time of issuing notice under section 148 had to form prima facie opinion for escapement of income rather than to reach to the conclusion that income had escaped assessment. Furthermore, initiation of proceedings could not be held invalid merely on the reasoning that there was no addition made by AO on account of freight expenses though there was mention of such expenses in the reasons recorded because addition on account of bogus purchases had been made by AO and it was sufficient enough for initiating proceedings under section 147. Therefore, reassessment was sustained as valid.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The above appeals have been filed by the Revenue and the assessee against the orders of ld. Commissioner of Income-Tax (Appeals) involving respective assessment years.
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