INCOME TAX ACT, 1961

Section 147

Reassessment - Validity - No reason to believe that income chargeable to tax had escaped assessment -

Assessee-company was issued notice under section 148 for reopening assessment. It was alleged that the assessee took profit/loss from shell companies, which were managed and controlled by various entry operators engaged in providing accommodation entries. Assessee submitted the AO was on a fishing enquiry and he did not even allege that there was any income as he proceeded on the basis that there was profit/loss for different entities. Thus the basic requirement of income chargeable to tax having escaped assessment was not satisfied. It was further submitted that there was no tangible material available with the AO to reopen the assessment. Held: The impugned notice for reopening was vague in as much as AO was not even certain whether the assessee made profits or loss or the entities to which it dealt with. The said fact would make the reasons bad in law and it could be said that it was a clear case of fishing inquiry. Therefore, as AO had no reason to believe at the time of issuing reopening notice that income chargeable to tax had escaped assessment, the said reopening would be considered as bad in law and accordingly, the reassessment proceedings would not sustain.

Distinguished:Nu Power Renewables Pvt. Ltd. v. ACIT & Ors. [2019] 94 taxmann.com 29 (Bom) PCIT v. Meenakshi Overseas Pvt. Ltd. [2017] 82 taxmann.com 300 (Delhi): 2017 TaxPub(DT) 1791 (Del-HC)

REFERRED : ACIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 291 ITR 500 (SC): 2007 TaxPub(DT) 1257 (SC) and Bakulbhai Ramanlal Patel v. ITO (2011) 56 DTR 0212 (Guj): 2011 TaxPub(DT) 2014 (Guj-HC)

FAVOUR : In assessee's favour

A.Y. :

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