INCOME TAX ACT, 1961

Section 147 read with Section 148

Reassessment - Validity - Absence of fresh material -

Assessee, a multi-level marketing company, transacted through various group companies/sister concerns, which were tasked to perform specific work on territorial and other defined basis. Being a cash intensive transaction model, the business reflected deposits in the assessee's accounts. AO reopened assessment of assessee on having substantial cash transactions carried out, having regard to the date of opening of the accounts. Assessee challenged issue of notice under section 148 contending that all information necessary for computation of income was already provided in the returns and that taking them into consideration AO framed the scrutiny assessment under section 143(3). Held: In the present case, the details of all sundry creditors were disclosed; the nature of business transactions by cash intensive transaction, all bank statements were also furnished in the original assessment. In case AO was not satisfied, he ought to have made further inquiries seeking confirmations in respect of particular entries. In the present case, no such inquiry was made. The failure of AO in that regard did not clothe it with the power to carry out reassessment under section 147/148. Also, the principal basis for reassessment appeared to be the opinion of the Revenue that substantial cash transactions were carried out, having regard to the date of opening of the accounts, which were not verified. Therefore, reassessment under section 147 was invalid.

REFERRED : CIT, Delhi v. M/s. Kelvinator of India Limited (2010) 320 ITR 561 (SC) : 2010 TaxPub(DT) 1335 (SC), CIT v. M/s. Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC) : 2009 TaxPub(DT) 0261 (SC)

FAVOUR : In assessee's favour

A.Y. : 2009-10

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