Gajender Kumar VS. ITO, Ward-1(5), Gurgaon, ITA Nos. 3154 & 3155/Del/2023, ITAT Delhi
ITAT Delhi held that a reopening based solely on reason to suspect, without adequate preliminary inquiry or tangible evidence, is unsustainable in law.
Background of the Case
The assessee, Mr. Gajender Kumar, did not file his return of income for AY 2012-13 and 2013-14. Based on information received regarding cash deposits in Nainital Bank Ltd. amounting to ₹25.89 lakhs, the Assessing Officer (AO) initiated reassessment proceedings under Section 147 by issuing notice u/s 148 of the Income-tax Act, 1961.
Later, upon obtaining the actual bank statement u/s 133(6), it was discovered that the correct deposit amount was only ₹13.39 lakhs—not ₹25.89 lakhs as assumed earlier.
Key Issue
Whether the AO had a valid “reason to believe” income had escaped assessment, or if the reassessment was based on a mere “reason to suspect”?
ITAT’s Analysis & Ruling
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No Preliminary Inquiry Made:
The AO recorded reasons for reopening without first verifying the actual cash deposit figure with the bank. The bank statement was obtained after issuance of notice u/s 148, leading to a major discrepancy in the cash deposit figure. -
Invalid Formation of Belief:
The Tribunal observed that the AO merely had a suspicion of escaped income based on an unverified figure. No tangible material existed at the time of forming the belief. -
Reliance on Bombay High Court Ruling:
The ITAT applied the Bombay HC judgment in Bic Cello (India) Pvt. Ltd. vs. ACIT [160 taxmann.com 474], wherein reopening based on incorrect AIR data without verification was held invalid. -
Non-Filing of Return Not Enough:
Even though the assessee was a non-filer, the AO was expected to convert suspicion into belief through proper inquiry (like issuing notice u/s 142(1)) before resorting to reassessment. -
Technical Lapse, Not Curable:
Since the reassessment was based on flawed jurisdictional grounds, the entire proceedings were quashed without examining the merits of the case.
Conclusion
The ITAT quashed the reassessment proceedings for both AYs 2012-13 and 2013-14, holding that:
“A reopening based solely on reason to suspect, without adequate preliminary inquiry or tangible evidence, is unsustainable in law.”