Bhavi Leasing & Finance Ltd. Vs ITO (ITAT Ahmedabad)
ITAT Ahmedabad held that reopening of assessment unsustainable in absence of nexus between material coming to the knowledge of the AO And formation of his belief of escapement of income.
Facts-
Reopening of the assessee’s case and reassessment done under section 147 has been challenged on various grounds. Before us, the ld.counsel for the assessee primarily challenged reopening for the following reasons:
i) Reasons did not reveal any escapement of income in the case of the assessee;
ii) No addition was made of the income which the AO had formed a belief of having escaped the assessment, on the contrary addition made related to another issue.
iii) Jurisdictional notice u/s. 148 of the Act was issued by AO who did not have jurisdiction over the assessee and was also not served on the assessee at all.
Conclusion-
It is trite law that that there has to be live link or close nexus between material coming to the knowledge of the AO and formation of his belief of escapement of income. In the absence of the same jurisdiction to reopen the case of assesses cannot be assumed under law. Therefore, we concur with the ld.counsel for the assessee that there being no nexus between the information in the possession of the AO and the formation of belief of escapment of income of the assessee, the jurisdiction assumed by the AO to reopen the case of the assessee and assess its income under section 147 of the Act was in gross violation of law. The assessment so framed under Section 147 of the Act is held to be non-est and void for this reason alone.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The present appeal has been filed by the assessee against the order passed by the Commissioner of Income Tax (Appeals)-I, Vadodara (in short referred to as CIT(A)), dated 22.03.2017 passed under section 250(6) of the Income Tax Act, 1961 (“the Act” for short) pertaining to Assessment Year 2006-07.
2. Ground No.1 to 7 raised by the assessee are legal grounds challenging validity of the assessment framed in the present case under section 147 of the Act on various grounds. These grounds read as under:
“1. That the learned CIT(A)-1, Baroda has erred both in law and on the facts in holding reopening of assessment and additions of Rs.78,00,000/- made by learned A.O. as valid in law even though no independent and prima facie investigation of information received.
2. That the learned CIT(A) has failed to appreciate the facts that the assessment order passed U/s 143(3) r.w.s. 147 by learned A.O. is null and void and without jurisdiction.
3. Whether on the facts and in the circumstances of the case and in law the learned CIT(A) is justified in holding that the notice issued U/s 148 dated 25.3.2013 and served by affixture on the next day ?
4. That the proceedings U/s 147 initiated by learned A.O. on the basis of information received from search cases and assessment made U/s 143(3) r.w.s. 147 by learned A.O. and confirmed by CIT(A) is not in accordance with the provisions of the Act which deserves to be cancelled.
5. That the assessment order was passed on the basis of informations received from third party and appellant has specifically asked for an opportunity to corss examination of parties on the basis whose statement, reopening of assessment was made U/s 143(3) r.w.s. 147 is in gross violation of natural justice, hence assessment be held as illegal bad in law and void.
6. That the learned A.O. who has issued notice U/s 148 by recording reasons has not personally verified the facts and merely relied on the vague information, proceedings U/s 147 initiated is not valid in law and assessment order deserves to be cancelled.
7. That the reasons recorded shows that the Pradip Overseas Group has introduced unaccounted income and the said company has failed to prove the genuineness of credits, in such circumstances additions is to be made in the hand of Pradip Group Companies and not in the hand of the appellant which deserves to be deleted.”
3. As is evident from the above, reopening of the assessee’s case and reassessment done under section 147 has been challenged on various grounds. Before us, the ld.counsel for the assessee primarily challenged reopening for the following reasons:
i) Reasons did not reveal any escapement of income in the case of the assessee;
ii) No addition was made of the income which the AO had formed a belief of having escaped the assessment, on the contrary addition made related to another issue.
iii) Jurisdictional notice under section 148 of the Act was issued by AO who did not have jurisdiction over the assessee and was also not served on the assessee at all;
4. We shall first deal with the contention of the assessee relating to reasons recorded. In this regard our attention was drawn to PB Pg.No.34, which was the copy of the reasons recorded. The contents of the same are reproduced hereinunder:
“Reasons for Reopening of Assessment u/s 147 of the I.T. Act.
As per letter No AGIT/Ccl(4)/ POL Group/Passing of inf/2012-13 dtd 11.03.13 received from the ACIT, CC 1(4), Ahmedabad, a search action U/s 132 of the IT Act was carried out the case of Pradip Overseas Group including Pradip Overseas Ltd. (Formerly known as Chetan Textiles Ltd). Pradip Enterprises Ltd. And Pradip Petrofils Pvt. Ltd. on 21.09.2010 and subsequent dates. During the course of search proceedings, it was found that the assessee group introduced its unaccounted income in the form of share capital/premium through various shell companies. In his statements recorded u/s 132(4) of the IT Act, Shri Pradipkumar J. Karia, main person of Pradip Overseas group admitted introduction of unaccounted income in the form of share capital/premium.
From the records available, it is seen that the aforesaid assessee has subscribed shares of following companies of Pradip Overseas Group as under:-
