In absence of any valid reason to believe that assessee’s income has escaped assessment, assumption of jurisdiction as prescribed u/s 147 is bad in law.

In absence of any valid reason to believe that assessee’s income has escaped assessment, assumption of jurisdiction as prescribed u/s 147 is bad in law. 

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In absence of any valid reason to believe that assessee’s income has escaped assessment, assumption of jurisdiction as prescribed u/s 147 is bad in law. 

 

Reopening Income escaping assessment Assessee filed return of income AO completed assessment Thereafter, AO received an information from DDIT(Inv.) revealing that assessee had received an amount from M/s. PACL for developing land A search operation u/s 132 was carried on M/s. PACL which revealed that M/s. PACL took advances from public against During survey and post-survey investigations, statements of Sh. P and Sh. H, Directors of Company were recorded who confronted that they had received a sum from M/s. PACL for development of land However, assessee was not aware of land which was stated to be developed on behalf of PACL and even not aware nature of land Assessee was not able to justify work done for Company of M/s. PACL AO held that said advance amount was required to be assessed under head ‘income from other source’ as assessee was not entitled to allow business expenses as same was not received by firm against any execution of any work done of M/s. PACL Thus, assessee had escaped assessment accordingly, notice u/s 148 was issued to reassess income which had escaped assessment CIT(A) confirmed AO’s action Held, AO stated that it received information about receipt of an amount by assessee from M/s PACL for developing of land However, in same recording, later on, AO changed that amount to Rs.15 crores which was admittedly correct amount which shows casual manner in which alleged reasons were recorded for reopening an assessment which was a serious matter AO had recorded only his conclusion and had not recorded any cogent and relevant reason and material for same It could be understood how and why AO concluded that assessee was not aware of land which was stated to be developed on behalf of PACL and even not aware of nature of land Said conclusion was drawn based on answers given by Shri. P and Shri. H, Directors of company to questions posed to them while recording their statement during course of survey Opinion of AO was that though Rs.15 crores was received by assessee from PACL for developing of land and receipts was also duly disclosed but expenses claimed in respect of same were not allowable as it was not actually incurred as he held that actual development work of land was not done However, AO’s recording could not point out as to what was expense claimed by assessee which was allegedly not incurred by assessee and basis of such belief As there was no material before AO during making of recording on issue to show that any expense claimed by assessee was not allowable as deduction and as receipt of Rs.15 crores was duly disclosed as income by assessee, there was no valid reason to believe that any income of assessee which was chargeable to tax had escaped assessment for year under consideration Consequently, assumption of jurisdiction to reopen assessment, was bad in law Assessee’s appeal allowed.

 

AMBEY CONSTRUCTION COMPANY vs. ASSISTANT COMMISSIONER OF INCOME TAX

 

(2019) 55 CCH 0161 AsrTrib

   

 

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