Belief Of AO Regarding Escapement Of Income Should Be Based On Some Tangible Information: Kolkata ITAT Quashes Reassessment

The Kolkata ITAT recently clarified that mere information regarding transfer of funds is no basis to conduct reassessment once source of such transfer was sufficiently established through banking channel.The Bench of Sanjay Garg (Judicial Member) and Girish Agrawal (Accountant Member) observed that “the belief of the Assessing Officer regarding escapement of income should be based on some tangible information and it should not be mere pretence of the Assessing Officer”. (Para 6)As per the brief facts of the case, the assessee filed its return declaring total loss at Rs. 9015/-. In this case the Assessing Officer received information from DDIT Investigation Unit 1(2), Kolkata that the assessee had received funds worth Rs. 2.20 crores from Solvent Real Estate Private Limited. It was also informed that the nature and source of funds in the hands of Solvent Real Estate Private Limited remained unexplained. Accordingly, the AO reopened the case u/s 147 and treated the said amount of Rs.2,20,00,000/- as unexplained income of the assessee and added the same into the income of the assessee. The Bench noted that the only information received by the Assessing Officer from Investigation Wing was that the assessee had received funds worth Rs.2,20,00,000/- from M/s Solvent Real Estate Pvt. Ltd. through banking channel. Further, the Bench noticed that initially funds were deposited into bank account of M/s Solvent Real Estate Pvt Ltd which were not commensurate to its turnover. The Bench also found that the funds were ultimately transferred from banking channel to the assessee from the bank account of M/s Solvent Real Estate Pvt Ltd, and the said confirmation only pertains to the transfer of fund from M/s Solvent Real Estate Pvt Ltd. to the assessee. However, the Bench stated that this information is not enough to form the belief that the income of the assessee for the year has escaped assessment. What has been alleged in the information was that the receipt of funds of M/s Solvent Real Estate Pvt. Ltd. from some other source was not commensurate to its turnover. However, the AR has placed reliance on paper-book to show that the turnover of the said M/s Solvent Real Estate Pvt. Ltd. for the financial year ending on 31.03.2010 was 37.69 crores, added the Bench. Thus, the Bench observed that mere receipt of funds by the assessee from M/s Solvent Real Estate Pvt. Ltd. in no terms be said to be any information of escapement of income of the assessee.Hence, the ITAT dismissed the Revenue's appeal observing that no additions have been made in the case of M/s Solvent Real Estate Pvt Ltd. and its source of funds have not been doubted by the Assessing Officer.Counsel for Appellant/ Revenue: Amuldeep Kaur Counsel for Respondent/ Taxpayer: A.K. TibrewalCase Title: ACIT verses M/s Ace Trexim Pvt LtdCase Number: I.T.A. No.441/Kol/2020Click here to read/ download the Order

Belief Of AO Regarding Escapement Of Income Should Be Based On Some Tangible Information: Kolkata ITAT Quashes Reassessment

Pankaj Bajpai

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