2010 (9) TMI 1214 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reassessment proceedings initiated u/s 147 of the Income-tax Act, 1961.
2. Legality of the notice issued u/s 148 of the Income-tax Act, 1961.
3. Justification of the additions made by the Assessing Officer (AO) on account of unexplained investments and commission receivable.

Summary:

1. Validity of Reassessment Proceedings Initiated u/s 147:
The assessee filed its return of income on 31.10.2001 declaring income of Rs. 9,850. The AO received information about cash deposits amounting to Rs. 42,38,300 in the assessee's bank account and initiated proceedings u/s 147 with prior approval. The AO framed the assessment order u/s 147/143(3) determining the income at Rs. 54,43,930, adding Rs. 11,95,784 on account of commission receivable and Rs. 42,38,300 on account of unexplained investment u/s 69. The ld.CIT(A) annulled the reassessment order following the ITAT's decision in the assessee's case for AY 2000-01, stating that the AO acted merely on doubt without sufficient reasons to believe that the deposits represented unexplained income.

2. Legality of the Notice Issued u/s 148:
The ld.CIT(A) observed that the AO issued the notice u/s 148 without due application of mind and based on the direction of the DDIT. The AO's reasons for reopening were similar to those for AY 2000-01, where the ITAT had quashed the reassessment. The ITAT upheld the ld.CIT(A)'s decision, noting that the AO's reasons were based on suspicion and not on concrete evidence, making the initiation of proceedings u/s 147 invalid.

3. Justification of the Additions Made by the AO:
The ITAT found that the AO did not have sufficient material to justify the additions made on account of unexplained investments and commission receivable. The reasons recorded for reopening the assessment were almost identical for both AY 2000-01 and AY 2001-02, and the ITAT had already quashed the reassessment for AY 2000-01 on similar grounds. The ITAT dismissed the Revenue's appeal, stating that the ld.CIT(A) was justified in following the Tribunal's decision for AY 2000-01.

Conclusion:
The ITAT dismissed the Revenue's appeal, upholding the ld.CIT(A)'s decision to annul the reassessment order for AY 2001-02. The ITAT found that the AO's initiation of proceedings u/s 147 was based on suspicion and not on concrete evidence, making the reassessment invalid. The order was pronounced in the open Court on 29.9.2010.