| The Tax Publishers2021 TaxPub(DT) 2109 (Kol-Trib) INCOME TAX ACT, 1961
Section 147
Information adverse might trigger 'reason to suspect' and not 'reason to believe. So, AO should have conducted reasonable enquiry and collected material which could make him believe, that, in fact, there was escapement of income, which in this case AO did not do, so reopening of assessment based on the reasons recorded by him, was bad-in-law.
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Reassessment - Validity - Reopening of assessment based on investigation report - Reason to suspect v. reason to believe
AO received information from investigation wing that two companies, namely, M/s. DRS Enterprises (P) Ltd. and Hanuman Traders (P) Ltd. are controlled by well-known entry operators of Kolkata and assessee-company was one of the beneficiaries and had received a fund or Rs. 5,00,000 from two companies. Accordingly, AO reopened assessment and made addition. Assessee contended that assumption of jurisdiction to reopen, was bad-in-law. Held: AO in the reasons recorded had specifically stated that assessee had received Rs. 25,00,000 from M/s. DRS Enterprises (P) Ltd. and M/s. Hanuman Traders (P) Ltd., which, according to him, was nothing but the unaccounted money of assessee company which prompted him to believe that there was escapement of income, and therefore, he resorted to reopening under section 147 of the Act by issuing notice under section 148. So, it should be noted that this was the factual basis/foundation based on information from Investigation Wing, which was the basis and reason for him to form a belief that income of assessee chargeable to tax had escaped assessment. However, when assessee brought to the notice of AO that assessee company did not receive Rs. 25,00,000 from M/s. DRS Enterprises (P) Ltd. and M/s. Hanuman Traders (P) Ltd., that the assessee company has received money from M/s. Radharani Vyapaar (P) Ltd. According to AO, M/s. Radharani Vyapaar (P) Ltd. has received the money directly from M/s. Kokila Trading Co. and M/s. Kokila Trading Co. has received money from M/s. DRS Enterprise. Thus, factual foundation on which AO based his reason for reopening of assessment did not exist. It had to be remembered that information adverse might trigger 'reason to suspect', and not 'reason to believe. So, AO should have conducted reasonable enquiry and collected material which could make him believe that, in fact, there was escapement of income, which in this case AO did not do, so reopening of assessment based on the reasons recorded by him, was bad-in-law.
Supported by:Hindustan Lever Ltd. v. Asstt. CIT ((2004) 268 ITR 332 (Bom-HC) : 2004 TaxPub(DT) 1424 (Bom-HC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2011-12
IN THE ITAT, KOLKATA BENCH
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