Case Law Details
Navkar Enterprises Vs ACIT (ITAT Mumbai)
Mumbai ITAT has quashed the reopening of assessment under section 147 made by the AO only on the basis of information received from the report of investigation wing.
According to the AO, Shri Pravin Kumar Jain was providing accommodation entries of bogus sales through various benami concerns run by him and has admitted of doing such activities in his statement which was recorded u/s. 132 (4) of the Income Tax Act, 1961. According to the AO from the documents / statement of Shri Pravin Kumar Jain, he got information that the assessee is one of the beneficiary who has availed accommodation entry from Shri Pravin Kumar Jain in the relevant assessment year i.e. AY 2007-08. Thus, according to the AO, as per the information he received, the assessee has obtained accommodation entry in the form of Bogus Sales amounting to Rs.3,00,52,199/-. Therefore, according to the AO he has reason to believe that income of the assessee to the tune of Rs.3,00,52,199/- has escaped assessment.
The ITAT observed that in the assessment order passed pursuant to the reopening itself the AO has accepted that assessee has purchased the goods as well as he made the sale; and therefore, AO was of the opinion that assessee might have purchased goods from the Grey Market and has availed the services of the Shri Pravin Kumar Jain for bogus bills. So, he taxed the profit embedded in the turnover of Rs.3,00,52,199/- at the rate of 12.5%.
The ITAT further observed that the information on the basis of which the AO formed the opinion of escapement of income i.e. bogus sales was not correct and instead, the AO after investigation has accepted the purchases as well as sales of goods shown by the assessee in the assessee’s book. In the light of this crucial fact, it is discerned that AO’s reasons recorded for reopening the assessment was based on information from the Investigation Wing, which can at best be termed as ‘Reason to suspect’ and not ‘Reasons to believe.
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