2023 (3) TMI 486 - HC - Income Tax

Reopening of assessment u/s 147 - reason to believe - large sums of cash debit/credits - information on the “INSIGHT PORTAL” from the Financial Intelligence Unit - HELD THAT:- No new tangible material as contended by the respondents. Debits and Credits can in no way disclose the nature of transactions or lead to an inference of income escaped assessment. The respondents have not taken any ground of extrapolation. The debits and credits cannot be a ground for further enquiry and verification and the same is impermissible. We find no live link or nexus between the information received and the income escaping assessment.

The Petitioner is carrying on a retail business of electronic appliances. Usually, appliances would be supplied to clients wherever required and payment would be received in cash upon delivery. Therefore, the cash deposits from various places cannot be doubted be considered suspicious transactions. In our view, there is no prima facie case made out that income has escaped assessment. The Petitioner has fully and truly disclosed all the material facts and there is no specific averment to show what material fact was required to be disclosed by the Petitioner that is not disclosed.

The ratio of the Judgment in the case of Lakhmani Mewal Das [1976 (3) TMI 1 - SUPREME COURT] that the reasons for formation of the belief must have rational connection with or relevant barring on formation of belief is squarely applicable to the present case.

The decision of the Apex Court in the case of ACIT vs. Rajesh Jhaveri Stock Brokers(P) Ltd. (2007 (5) TMI 197 - SUPREME COURT) is vaguely relied upon. There is no reason provided as to why the debit and credit transaction had no mention in the recorded reasons nor was there meaningful averment with regard to the nature of transaction. It is pertinent to note that whilst the order has been passed by NFAC the reasons are recorded by respondent No. 1 to which there is no explanation in the affidavit in reply. In our view the response in the impugned order as to the nature of transaction, and as to how it makes it suspicious are missing. Decided in favour of assessee.