INCOME TAX ACT, 1961

Section 148

Reassessment - Validity - Non-recording of reasons by AO -

During assessment proceedings, AO received information from DCIT that assessee company was only engaged in providing bogus accommodation entries. AO noticed that assessee was one of the beneficiaries of accommodation entry in the shape of bogus share premium and relied upon the material supplied by DCIT to believe that there was an escapement of tax. AO reached the conclusion that when it stands proved that purported investor company was only dealing in providing accommodation entries to various beneficiaries, share premium received by assessee-company could not be found to be ingenuine transaction and thereby made an addition under section 68. CIT(A) confirmed the addition made by AO. Held: Reasons have not been recorded by the AO, rather based the assessment order on the information received from DCIT. When assessee had made a plea for supply of reasons recorded and the said request had not been adhered to and AO proceeded to pass the assessment order even without providing an opportunity to cross examine the witness. So, the very initiation of assessment proceedings under section 147/148 was void. As decided in GKN Driveshaft (India) Ltd. [(2002) 125 Taxman 963 (SC) : 2003 TaxPub(DT) 0734 (SC)] it was held that when assessee was given copy of reasons recorded for issuance of notice under section 148 by AO, entire assessment proceedings were to be quashed.

Followed:GKN Driveshafts (India) Ltd. v. ITO (2002) 125 Taxman 963 (SC) : 2003 TaxPub(DT) 0734 (SC) S. Narayanappa & Ors. v. CIT, Bangalore 1967 AIR 523 : 1967 TaxPub(DT) 0198 (SC) and Principal CIT v. Jagat Talkies Distributors (2017) 85 Taxmann.com 189 (Delhi) : 2017 TaxPub(DT) 3981 (Del-HC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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