Pareshkumar Punamchand Shah Vs ITO (ITAT Ahmedabad)
Prima-facie formation of a belief was required u/s 147/148 based on tangible material having live link/nexus that income escaped assessment
Conclusion: Existence of reasons to belief by way of tangible material and its live link/nexus with formation of belief by AO that income of the assessee had escaped assessment was relevant, and not the sufficiency of material because at the stage of reopening prima-facie belief of the AO based on material on record that income had escaped assessment. AO was having sufficient and tangible incriminating information that the income of assessee had escaped assessment and AO had rightly invoked provisions of Section 147/148.
Held: Assessee, an individual, had deposited cash in his bank account. During assessment, AO observed that assessee had entered into share transactions and earned income from commodities through Multi Commodity Exchange. Since assessee did not file his return, AO after verification of the source of cash deposits made by assessee in his bank and share transactions as well transactions made in commodities, reopened the assessment. Assessee however, failed to file return in pursuance to notice u/s 148 and also failed to comply with statutory notices u/s 142(1) during the reassessment proceedings. Accordingly, AO proceeded to frame ex-parte assessment u/s 144 by making additions to the tune of Rs.29,93,000/- to the income of assessee towards undisclosed cash deposits. It was held that AO had rightly invoked provisions of Section 147 as AO rightly had reasons to believe that income of assessee had escaped assessment. At the stage of reopening of assessment, conclusive proof of income escaping assessment was not required rather a prima-facie formation of a belief of AO was required based on tangible material having live link/nexus with the formation of belief that the income of the assessee had escaped assessment. The said reasons to believe that income had escaped assessment should have a live link or nexus with the information/material before AO which led to the formation of belief that income had escaped assessment . In the instant case, the assessee did not file return of income u/s 139. Secondly, assessee had deposited cash of Rs. 29,93,000/- (sic. Rs. 24,83,000/-) in his bank accounts with Vijaya Bank and Indusind Bank. Thirdly, assessee had entered into share transactions and transactions in commodities through MCX to the tune of Rs. 3,02,75,77,050/- . Despite entering into massive financial transactions, the assessee had not filed any return of income was filed u/s 139, AO was having sufficient and tangible incriminating information that the income of assessee had escaped assessment and AO had rightly invoked provisions of Section 147/148 of the Act. Existence of reasons to belief by way of tangible material and its live link/nexus with formation of belief by AO that income of assessee had escaped assessment was relevant, and not the sufficiency of material because at the stage of reopening prima-facie belief of AO based on material on record that income had escaped assessment. In the interest of justice, the matter was restored back to the file of CIT(A) to re-adjudicate the issue of additions made by AO on merits in accordance with law, after giving proper opportunity of being heard to assessee as well AO.
