INCOME TAX ACT, 1961

Section 147

Reassessment - Reason to believe - No tangible material - Change of opinion

AO reopened assessment by issuing notice under section 148. In the reasons recorded for reopening AO mentioned that assessee had made payment of Rs. 11 lakhs to M/s. 'JK Lakshmi Cement Ltd. for hiring services of non-scheduled flight (chartered flights) and claimed this expenses as business expenditure. While forming reason to belive that income had escaped, it appeared to AO that expenses were not allowable under section 37.Held: It was undisputed that there was no fresh tangible material before AO on the basis of which he formed belief that income escaped in case of assessee. The only reason which had been recorded by the AO was that it appeared to him that concerned expenses were not allowable under section 37. It was mere change of opinion based on suspicion without any tangible information that said expenditure was not allowable under section 37. Even AO was not sure as to whether said expenditure was not allowable under section 37, accordingly, notice under section 148 was not validly issued by AO and it was based merely on suspicion and, therefore, consequent reassessment proceedings were also invalid.

Followed:Nitin P Shah v. Dy. CIT (2005) 146 Taxman 536 (Guj) : 2005 TaxPub(DT) 1124 (Guj-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12

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