Reopening of assessment u/s 147 of the IT Act , 1961 on the basis of information from Investigation Wing of the department
On the basis of information received from the investigation wing of the department, the Assessing officer cannot issue notice u/s 148 of the act mechanically, without using his own mind. He has to go to the information received from the investigation. Sufficiency of information is not required at this stage, but use of mind is required to form opinion regarding escapement of income, recording reasons and issue of notice u/s 148. Even if specific information is there from the DDIT, even then ITO has to apply his own mind.Sufficiency of tangible material is required at this stage and use of mind by the AO.
|REOPENING OF ASSESSMENT u/s 147 and issue of notice u/s 148 ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING OF THE INCOME TAX DEPARTMENT.|
Assessing Officer cannot mechanically issue notice under section 148 merely on the basis of information allegedly received from DIT (Inv.)
(a) When the reasons are vague and are not based on any tangible material, Reopening of assessment under section 148 is bad in law.
(b) The Assessing Officer cannot mechanically issue notice under section 148 of the Act, on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation) without proper application of mind and independent analysis and investigation made. Reassessment deserves to be quashed.
|Reassessment merely on the basis of investigation wing held to be not valid.|
Notice issued after the expiry of four years the end of the relevant assessment year by the assessing officer merely acting mechanically on the information supplied by the Investigation wing about the accommodation entries provided by the assessee to certain entities without applying his own mind was led to be not justified.-[CIT v. Kamdhenu Steel & Alloys Ltd. (2012) 248 CTR 33: 206 Taxman 254 (Del.)]
|Assessing Officer simply reproducing details received from Director of Income-Tax without any verification and examination and investigation -Reassessment was held to be not valid.|
Allowing the appeal the Tribunal held that reasons recorded for issuance of notice under section 148 of the Act. The Assessing Officer had simply reproduced the details received from the Director of Income-Tax, Investigation Wing, without any verification and examination of the information received. Notice under section 148 of the Act and all the subsequent proceedings were not sustainable. (Assessment year-2003-2004).-[Monarch Education Society v. ITO (E)(2015) 37 ITR 512 : 68 SOT 315 (URO) (Delhi)(Trib.)]
|Notice issued under section 148 on the basis of information received from Investigation Wing of the Department was held to be valid.|
It has been observed in the case of AGR Investment Limited versus Additional Commissioner of Income Tax and Another that the Phrase “reasons to believe” would mean the cause or justification for the Assessing Officer to know or suppose that income had escaped assessment. It does not mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. At that stage, the final outcome of the proceedings is not relevant. The only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether or not the material would conclusively prove escapement is not the aspect or concern at that stage but this aspect has to be examined subsequently in the reassessment proceedings.
It was held that sufficiency of material for reopening of assessment under section 147 is not required. It was held that where Assessing officer had specific information from office of DIT (Investigation) as regards transactions entered into by assessee company with a number of concerns which had made accommodation entries and they were not genuine transactions, it could be said that there was material on basis of which notice under section 148 could be issued.-[AGR Investment Ltd. v. Addl. CIT (2011) 333 ITR 146 (Delhi).
|Information contained in letter of Directorate of Investigation could be said to be definite information and ITO could act upon for taking action under section 147|
Assessee claimed that he had incurred capital loss on sale of shares held in a company- Loss was claimed on basis of official quotation at Calcutta stock Exchange and same was allowed in original assessment-Subsequently, ITO received letter from Directorate of Investigation giving detailed particulars collected from Bombay Stock Exchange which revealed earning of share and price of share increased during period in question and quotation appearing at Calcutta Stock Exchange was as a result of manipulated transaction- Very next day of receipt of letter, ITO issued notice under section 147 (b)-Whether information contained in letter of Directorate of Investigation could be said to be definite information and ITO could act upon for taking action under section 147 (b)- Held, yes- Whether on basis of facts and information contained in letter of Directorate of Investigation, ITO could have formed opinion that there was reason to believe income chargeable to tax had escaped assessment and he was justified in his action- Held, yes- Whether merely because notice was issued on very next day of receipt of letter it did not mean that ITO did not apply his mind to the information-Held, yes.
Wherein loss claimed by an Assessee on sale of shares on the basis of price quoted in Calcutta Stock Exchange had been allowed by the Assessing Officer. Later on the Assessing Officer received letter by the Assessing Officer from the DDIT (Inv.) regarding price quoted at Calcutta Stock Exchange being manipulated and that price quoted at Bombay Stock Exchange was much higher. This information was held by the Hon’bleSupreme Court to be enough to form belief regarding escapement of income.[Assessment year 1969-70].[ITO v. Purushottam Das Bangur& another (1997) 224 ITR 362 (SC).]
In the result, it is very much clear that ITO has to apply his mind and form an opinion for reopening of the assessment and he must have some sort of material with him may be sent from the Investigation Wing of the department on the basis of that material he can reopen the assessment. Without material, without application of his mind, without investigation and making enquiry, the reopening is bad enough .
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