2015 (10) TMI 2383 - HC - Income Tax

Reopening of assessment - AO received information from the Enforcement Directorate (ED) that in the books of the Assessee there were huge cash deposits - Held that:- The nature of the information provided by the governmental agency in that case did not itself refer to any amounts or entries in the books of accounts of the Assessee. In the present case, however, the information received from the ED makes a reference to what was found in the books of accounts of the Assessee.

The next question that had to be examined by the AO was whether what was disclosed in the books of accounts was also disclosed in the returns filed by the Assessees. If it was not disclosed, then possibly the AO could have reasons to believe that the cash deposits reflected in the books of accounts may have escaped assessment. However, no effort appears to have been made by the AO to examine the returns filed by the Assessee in either of these cases.

As far as RL Travels is concerned, the further information concerning payments made to third parties, which were unable to be verified by the ED, also required to be assessed by the AO by examining the returns filed to discern whether the said transaction was duly disclosed by the Assessee. It is the treatment of the entries in the books of accounts in the returns filed by the Assessee that would be determinative of whether in fact there was any concealment of relevant information or whether any income had in fact escaped assessment.

With the AO in either of these cases not having adopted that approach, it could not be said that the jurisdictional requirement of the AO having to form reasons to believe on the basis of some tangible material that income had escaped assessment was fulfilled.Consequently, the Court finds no error having been committed by the ITAT in the impugned orders in coming to the conclusion that the reopening of the assessments was bad in law. - Decided in favour of assessee.