INCOME TAX ACT, 1961

--ReassessmentValidity Detailed inquiry and verification of records assessment of income--After filing of return of income the assessing officer received certain information from investigation wing that certain beneficiaries had resorted to money laundering by giving unaccounted cash to person called entry operation and in turn taking from them cheques or demand draft is the grand of share application money or sale proceeds of non-existent goods thereby plouging back their undeclared cash into accounts or business. After not conducting detailed inquiry but recording reasons the assessing officer made addition to income on the ground that assessee could not prove genuineness as well as creditworthiness of share applicants. The additions as such made by assessing officer was deleted by the Commissioner (Appeals). Held: Not justified. The reopening of assessment on the basis of detailed reasons recorded by assessing officer was valid as assessing officer had not based his assessment solely on information received from investigating team only. The reopening of assessment was valid.

The assessing officer had recorded detailed reasons on receipt of information from the investigation wing of the department. It is a fact the assessing officer had not conducted any inquiry to verify information received by him before issue of notice under section 148. The Commissioner (Appeals) has cancelled the assessment on the ground that the assessing officer before issue of notice under section 148 had neither conducted inquiry nor verified information with the return of income and hence it was a case of non-application of the mind. [Para 7] From the perusal of the reasons recorded by the assessing officer, it is seen that in paragraph 1 the assessing officer has mentioned about the receipt of report from the office of the Commissioner indicating that enquiries were initiated by the Directorate of Income Tax (Investigation) to probe into bank account which were used by entry operators for the purpose issue of cheques to beneficiaries against cash paid by them. In paragraph 2 the assessing officer has mentioned the outcome of enquiries conducted by the investigation wing. In paragraph 3 the assessing officer has summed up the result of enquiries conducted by investigation wing of the department indicating the non-genuineness of the share capital or receipt of gifts or consideration for sale/purchase. In paragraph 4, the assessing officer has given details of credit entries appearing in the bank account of the assessee coming from the account of three persons. The assessing officer on the basis of the report given by the investigation wing has come to the conclusion that the entries were squarely hit by section 68 of the Act. There is no dispute about the fact that the assessing officer had not conducted independent enquiries after receipt of information. However, he has analyzed the report received from the investigation wing to come to a conclusion that transactions were not genuine. The reasons recorded in the case of the present assessee are exhaustive. The assessing officer had applied his mind while recording the reasons for reopening of the assessment under section 147 of the Act. Moreover, the information is specific giving the details of the branch, the name of the account holder and the date of cheque and cheque number. [Para 12] From the decision of the Honble Supreme Court in the case of Phool Chand Bajrang Lal it is clear that sufficiency of reasons for forming the belief cannot be judged by the court. From the reasons recorded, the learned authorized representative of the assessee has not pointed out as to why the belief formed by the assessing officer was not bona fide or was based on vague, irrelevant and non-specific information. As mentioned above, a specific information was received by the assessing officer through the office of the Commissioner that the assessee had received amount of Rs. 1,60,000 from three persons through bank accounts. Under the law, there is no requirement that the assessing officer should verify the information before forming the belief that income had in fact escaped assessment and only then he can resort to proceedings under section 148 of the Act. What is to be seen is whether there is nexus with the information and formation of belief by the assessing officer while issuing notice under section 148 of the Act. In the case before us, the assessing officer had recorded detailed reasons in order to arrive at the conclusion that the provisions of section 68 are applicable and thus resulted in escapement of income. We find that there is nexus between the specific information and reasons recorded by the assessing officer. Therefore, in our considered opinion, the assessing officer is justified in reopening the assessment. The Commissioner (Appeals), therefore, in our considered opinion is wrong in holding that there is no nexus between the information received and the reasons recorded by the assessing officer. We, therefore, uphold the reopening of assessment. [Para 13]