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2018 (10) TMI 1027 - AT - Income TaxReopening of assessment - regular scrutiny assessment u/s. 143(3) completed followed by reopening of assessment - reasons recorded by the AO before proposing to reopen the assessment - unexpalined exports - borrowed knowledge by AO - non independent application of mind - Held that:- AO based on the information given by the DIT (Inv.) clearly reveals that assessee had exported 55.936 MT iron ore to its sister concern M/s. S. K. Resources Ltd., Hongkong for a total consideration of ₹ 13,90,97,755/-. This fact is not a new information since we note from the original assessment order dated 15.03.2013 passed u/s. 143(3) of the Act for the year under consideration wherein these facts are discernible from para 3.2 wherein the AO has noted in his words “the facts of this case are that the assessee firm deals in export of iron ore and other minerals. It has made total sales of ₹ 13,90,97,755/-. This total sale is in respect of iron ore only and the whole of the sales have been made to the sister concern M/s. S. K. Resources Ltd., 2601, Metropoly Tower, Hongkong." Thereafter, the AO noted from the information given by the DIT(Inv) that the assessee had sold the iron ore through its associated enterprises to the end users at China for a higher price (prevailing price at China on the date of shipment) and thus, he concluded that there is profit shifting from India to China. This conclusion based on the aforesaid information is fundamentally flawed for the reason that DIT(Inv) has first of all given the FOB rate of iron ore prevailing in India which has been compared with the market rate prevailing at China. AO has simply gulped the information from DIT(Inv) to form a conclusion about escapement of income is itself flawed and cannot pass the test of ‘reason to believe’ as laid by judicial precedents as discussed above. From the aforesaid reasons it is evident that other than the vague information given by DIT (inv) there is no other material the AO collected after preliminary enquiry which could have enabled him at the time of recording reasons to come to a conscious independent conclusion that “income of the assessee has escaped assessment”. The information given by DIT(Inv) can only be a basis to ignite/trigger “reason to suspect” for which reopening cannot be made for further examination to be carried out by him in order to strengthen the suspicion to an extent which can form the belief in his mind that income chargeable to tax has escaped assessment. No quantification of income escaping assessment has been spelt out by the AO in the reasons recorded for justifying reopening u/s. 147 of the Act. - decided in favour of assessee
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