2017 (12) TMI 1813 - AT - Income Tax

Reopening of assessment u/s 147 - addition u/s 68 - HELD THAT - Identical issue had come up before the Tribunal in assessee s own case in the immediately preceding assessment year and the Tribunal held the reassessment proceedings as not valid in the present case the reopening was done only on the basis of information received from Investigation Wing. Therefore in view of the ratio laid down by the Hon ble Jurisdictional High Court 2015 (10) TMI 754 - DELHI HIGH COURT the reopening was not valid and the subsequent assessment framed was void ab initio. Accordingly the same is set-aside. - Decided in favour of assessee.

Issues:
1. Validity of reopening of assessment.
2. Addition made by the Assessing Officer based on accommodation entries.
3. Appeal against CIT(A) order on merit and legal grounds.

Validity of Reopening of Assessment:
The case involved the reassessment of an individual assessee for the assessment year 2008-09 based on information received from the Investigation Wing regarding accommodation entries. The Assessing Officer reopened the case under Section 147/148 of the Income Tax Act, 1961, as the assessee was identified as a beneficiary of accommodation entries. The reasons for reopening highlighted the details of the transactions and the alleged undisclosed income. The Tribunal referred to a previous case involving the same assessee in the preceding assessment year, where it was held that reopening based solely on information from the Investigation Wing was invalid. Citing relevant case law, the Tribunal emphasized the necessity for the Assessing Officer to independently apply their mind before initiating reassessment proceedings. Consequently, the Tribunal declared the reassessment proceedings as invalid and the subsequent assessment as void ab initio.

Addition Based on Accommodation Entries:
The Assessing Officer made an addition of Rs. 14,54,400 to the assessee's total income, alleging that the amount represented a bogus purchase through accommodation entries. Despite the assessee's explanations and assertions of legitimate sources and transactions, the Assessing Officer proceeded with the addition due to the absence of confirmation from the involved party, M/s Aadi Impex. The CIT(A) upheld the addition, emphasizing the findings during the search operation and the lack of evidence refuting the accommodation entry claim. However, the Tribunal's focus on the validity of the reassessment proceedings led to the allowance of the appeal solely on legal grounds, without delving into the merit of the addition.

Appeal Against CIT(A) Order:
The assessee challenged the CIT(A)'s decision on both merit and the legality of the reassessment. While the CIT(A) dismissed the appeal on both fronts, the Tribunal's analysis primarily centered on the legality of the reassessment process. The assessee's counsel presented precedents and decisions highlighting the requirement for independent application of mind by the Assessing Officer before reopening assessments based on external information. In contrast, the Department's representative argued for upholding the addition, citing the findings from the search operation and legal precedents supporting the initiation of reassessment proceedings. Ultimately, the Tribunal allowed the appeal solely on the basis of the invalidity of the reassessment proceedings, thereby refraining from addressing the merits of the addition made by the Assessing Officer.

In conclusion, the Tribunal's judgment in this case primarily focused on the validity of the reassessment proceedings, emphasizing the necessity for the Assessing Officer to independently apply their mind before initiating such actions based on external information. The decision to declare the reassessment as invalid and the subsequent assessment as void ab initio was based on established legal principles and precedents, leading to the allowance of the assessee's appeal solely on legal grounds.

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