Well Trans Logistics India Pvt. Ltd. Vs ACIT & Ors (Delhi High Court)
No reassessment as not even a line of reason which may justify information of belief that income escaped assessment
Conclusion: Reassessment under section 147 was not justified as there was no “close nexus” or “live link” between tangible material and the reason to believe that income had escaped assessment. The information received from the Investigating Unit of the Revenue could not be the sole basis for forming a belief that income of the assessee had escaped assessment.
Held: Assessee was engaged in the business of freight forwarding. Assessee filed objections to the reopening of the assessment on the ground that “reason” recorded was solely based on the DDIT’s letter and there was no independent exercise of quasi-judicial power on the part of AO and that the belief of escapement of income was in fact the belief of DDIT and not of the AO. Assessee in its objections submitted that the cash deposits in the bank account, being part of books of accounts and being out of service charges income, which had already been accounted for as income in the profit and loss account, could not have led for forming ‘reason to believe’ of escapement of income and there was no date on the reason recorded and hence it could not be ascertained as to whether the reason was recorded prior to the issue of notice under Section 148. Revenue had argued that it was only through information received from the Investigating Wing that the Revenue came to know about the nature and source of credits and after going through the records, AO formed the belief regarding the assessment of income. It was held that there was no “close nexus” or “live link” between tangible material and the reason to believe that income had escaped assessment. The information received from the Investigating Unit of the Revenue could not be the sole basis for forming a belief that income of the assessee had escaped assessment. Having received information from the Investigating Wing, it was incumbent upon AO to take further steps, make further enquiries and garner further material and if such material indicate that the income of the assessee had escaped assessment and then form a belief that the income of assessee had escaped assessment. AO had not acquired any material to form such belief. There was not even a line of reason which might justify the formation of the belief. Consequently, reopening of assessment did not satisfy the requirement of law in terms of Section 147 & 148.
