Sanjay Kaul Vs ITO (Delhi High Court)
Delhi High Court held that concluded assessments cannot be reopened merely based on suspicion. Accordingly, reassessment quashed as there is no tangible material to form ‘reason to believe’ that income has escaped assessment.
Facts- The Petitioner has filed the present petition under Article 226 read with Article 227 of the Constitution of India, impugning a notice dated 30.03.2019 issued by the Respondent No.1 under Section 148 of the Income Tax Act, 1961 in respect of Assessment Year 2014-15.
By way of the present petition, the Petitioner has essentially challenged the action of the Respondent No.1 to reopen the proceedings for AY 2014-15. It is the petitioner’s case that the Respondent No.1 did not have any reason to believe that the petitioner’s income for the AY 2014-15 had escaped assessment and that the impugned notice was issued merely based on conjecture and surmises as opposed to any tangible material.
Conclusion- Mere purchasing and selling of the shares by the Petitioner would not in itself lead to the conclusion that the transactions were fraudulently contrived to secure accommodation entries for evading tax liability. The conclusion arrived at by the AO is based on the suspicion created by the information that the shares of IISL and SRK are penny stocks. However, the said information cannot be sufficient reason for the AO to believe that the Petitioner’s income for AY 2014-15 had escaped assessment as it lacked specific material regarding Petitioner’s income escaping the assessment. The impugned notice was issued based on general information derived from the report of the Investigation Wing and the statement of Mr. Anil Kedia, but no specific information regarding the Petitioner’s involvement in the alleged arrangement for evading tax liability for AY 2014-15. Further, the materials based on which the said report was prepared have also not been placed on record by the Revenue.
