INCOME TAX ACT, 1961

Section 147

Reassessment - Reason to believe - Alleged information received from Dy. CIT -

AO reopened assessment based on information received from Dy.CIT central circle, Panaji, as to assessee having sold certain property but not having returned/paid the capital gains tax. Assessee duly explained about the transaction that land being agricultural and not falling within definition of capital asset under section 2(14) was not exigible to capital gains tax. However, AO without having met with reply and explanations given by assessee made addition.Held: Facts on record revealed that after receipt of information from DCIT, Panaji, a survey action was carried out at premises of assessee from where sale deed in question was found. Thereafter, not only AO, but also Deputy Director of Income tax (Inv.), H.P., Shimla, carried out investigation in respect of the matter. However, AO conveniently overlooked or to say skipped above facts and events in the reasons recorded for reopening had AO mentioned about the aforesaid fact and events of investigation by his office as well by the office of Deputy Director of income Tax (Inv.), H.P., Shimla, he should have been required to meet or to say deal with reply and explanations furnished by the assessee to his predecessor AO as well as with result/report on investigation carried out by Deputy Director of income tax (Inv.), H.P., Shimla, and had to point out as to why he was not satisfied with the reply and explanations furnished by assessee and report thereof , if any, of his predecessor (assessing officer) and also with report of Deputy Director (supra), if any, on investigation carried out by him in respect of the matter. However, AO skipped the entire episode of earlier proceedings and based his reasons for reopening. On alleged information received from Dy.CIT, central circle, Panaji. Accordingly, action of reopening might not pass the test of reasons to believe and when very reasons on the basis of which reopening was done, could not form the basis of forming belief by AO that income of assessee had escaped assessment, consequential reassessment order passed by AO was illegal.

REFERRED : ITO v. Lakhmani Mewaldas (1976) 103 ITR 437 (SC) : 1976 TaxPub(DT) 742 (SC).

FAVOUR : In assessee's favour.

A.Y. : 2008-09

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