When the AO contradicts its own statment or no independent application of mind is demonstrated then the notice for initiating re-assessment is considered to be bad in law and hence not sustainable

When the AO contradicts its own statment or no independent application of mind is demonstrated then the notice for initiating re-assessment is considered to be bad in law and hence not sustainable

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When the AO contradicts its own statment or no independent application of mind is demonstrated then the notice for initiating re-assessment is considered to be bad in law and hence not sustainable

ACIT Vs Asis Plywood Pvt Ltd

Whether when the AO contradicts its own statment or no independent application of mind is demonstrated, then the notice for initiating re-assessment is considered to be bad in law and hence not sustainable – YES: ITAT

– Revenue’s appeal dismissed: DELHI ITAT

Whether when the AO contradicts its own statment or no independent application of mind is demonstrated, then the notice for initiating re-assessment is considered to be bad in law and hence not sustainable – YES: ITAT

 the sec. 147 empowers the AO to initiate proceedings under that section to assess or reassess any income of the assessee that escapes assessment. The powers to initiate proceedings under section 147 of the Act are, however, not unfettered and unrestricted. In order to initiate proceedings under section 147, the assessing officer has to comply with the provisions of sections 148 to 153 of the Act. Under the scheme of the Act, the AO can initiate proceedings under section 147 of the Act only if he has “reasons to believe” that any income of the assessee has escaped assessment. In terms of section 148 of the Act, the assessing officer is required to record the reasons on the basis of which proceedings under section 147 of the Act are initiated. The reasons recorded must show application of mind by the assessing officer to come to the belief that any income of the assessee had escaped assessment, and thus the reasons act as the stepping stone in initiation of proceedings under section 147 of the Act. The validity or otherwise of the proceedings initiated under section 147 is adjudged on the basis of such reasons recorded. The reasons recorded must, therefore, show application of mind by the assessing officer. If the reasons recorded are vague or ambiguous, the proceedings initiated under section 147 of the Act are liable to be held as invalid and bad in law;

 on perusal of the reasons shows that the Assessing Officer has clearly borrowed the information received from the Investigation Wing but he has not carried out any verification to test the veracity of the information which has been passed by the Investigation Wing. Thus, he has proceeded to form an opinion on the basis of borrowed reasons and there is no independent application of mind. It is also seen in the assessment order that the Assessing Officer had duly noted that the original return of income was filed but has noted in the reasons that the assessee had not filed any return. Thus, the Assessing Officer has contradicted himself by admitting that the return was filed and then saying that it was not filed. Thus, this establishes that notice u/s 148 vis-à-vis the reasons recorded is devoid of any application of mind. In the instant case, the facts are identical and, therefore, respectfully following the ratio of the judgment as laid down by the Delhi High Court in the case of Principal CIT vs. RMG Polyvinyl (I) Ltd., the Court uphold the findings of the CIT (A) in holding that the initiation of reassessment proceedings in the instant case was bad in law and not sustainable.

ITA No.2144/Del/2015

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