The Delhi High Court in the case Saraswati Petrochem Pvt. Ltd. Versus Income Tax Officer observed and has held that the Assessing Officer did not have the tangible material on record that could have persuaded him to form the belief that income, otherwise it is chargeable to tax, had escaped assessment.
The bench comprising of Justice Rajiv Shakdher and Justice Girish Kathpalia in the case observed and has stated that the Assessing Officer, AO did not employ diligence while triggering the reassessment proceedings against the petitioner or assessee. Because the Assessing Officer, AO realized that the information received by him from ITO (Nahan) concerned the preceding period, he attempted to commence reassessment proceedings as stated under Section 147, section 148 of the Income Tax Act by simply comparing the ‘source of funds’ which is reflected under various heads in the balance sheets for the preceding AY and the AY in issue.
In the present case, the Assessing Officer, AO initiated the assessment or the reassessment proceedings vis-à-vis the petitioner or assessee concerning Assessment Year (AY) 2011-12 via notice dated March 31, 2018, which is issued under Section 148 of the Income Tax Act.
The assessee contended before the court that the information based on which the AO formed ‘reason to believe’ that income otherwise chargeable to tax had escaped assessment had not been furnished by him to the petitioner or assessee. Thus, the reason to believe”, as recorded by the AO, alludes to the communication dated March 12, 2018 received from the Income Tax Officer, Nahan and an FIR and chargesheet filed by the Central Bureau of Investigation, CBI which included the names of the directors of the petitioner or assessee.
The court stated that neither the communication nor the FIR and chargesheet have been furnished to the petitioner or assessee.
The assessee in the case urged that be a case of borrowed satisfaction and that the Assessing Officer, AO needed to independently verify the information and the material that had reached him.
On the other hand, the department contended before the court that the assessee did not respond to the communication dated March 20, 2018 and that the Assessing Officer, AO had no option but to trigger reassessment proceedings against the petitioner or assessee by issuing the impugned notice.
The court while considering the facts and circumstances of the case stated that AO had, perhaps, no tangible material available with him to form the belief that income, otherwise chargeable to tax, had escaped assessment.
Therefore, the court observed that the phraseology used by the AO reveals that he suspected that the income chargeable to tax had escaped assessment and the approach of the Assessing Officer, AO breached the other well-established principle of law that suspicion and conjecture cannot form the basis for triggering reassessment proceedings against an assessee.
The counsel, Advocate Rano Jain appeared for the petitioner.
The counsel, Advocate Prashant Meharchandani represented the respondent.
