InITA no.4958/Mum./2018 -ITAT- ITAT (Mumbai) upholds re-assessment proceedings under Section 147 of Income Tax Act against Nakoda Metal Industries based on information received from investigation wing
Members B.R. Baskaran (Accountant) & Sandeep Singh Karhail (Judicial) [14-08-2023]

Read Order:Nakoda Metal Industries v. Income Tax Officer Ward–19(2)(4), Mumbai

Chahat Varma

New Delhi, September 18, 2023: The Mumbai bench of the Income Tax Appellate Tribunalhas upheld the re-assessment proceedings, initiated against Nakoda Metal Industries (assessee), based on information received from the investigation wing.

In this case, the assessee was a firm, that had filed its income tax return for the relevant year. Subsequently, based on information received from the Directorate General of Income Tax (Investigation) Wing in Mumbai, which had received data from the Sales Tax Department of Maharashtra regarding certain dealers involved in providing accommodation entries through the issuance of fake sales/purchase invoices without actual goods transactions, the authorities initiated proceedings under Section 147 of the Income Tax Act. After conducting a detailed examination of the case, the Assessing Officer (AO) issued an order, wherein they determined the total income of the assessee. This determination included an addition of Rs. 29,60,308, representing 12.5% of the total non-genuine purchases. Furthermore, the Commissioner of Income Tax (Appeals) [CIT(A)] dismissed the assessee's challenge to the re-assessment proceedings initiated under Section 147 of the Act.

The two-member bench of B.R. Baskaran (Accountant) and Sandeep Singh Karhail (Judicial) observed that if the AO has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the AO should have finally ascertained the fact by legal evidence or conclusion.

In light of this interpretation, the bench ruled that if there existed relevant material upon which a reasonable person could form the necessary belief that income subject to taxation had not been correctly assessed, then the initiation of proceedings under Section 147 of the Income Tax Act is valid.

In the case at hand, the bench observed that the re-assessment proceedings against the assessee were initiated based on information received from the investigation wing. Therefore, the bench found no deficiency in the re-assessment proceedings that had been initiated by the AO under Section 147 of the Income Tax Act and subsequently upheld by the CIT(A).

Consequently, the objections raised by the assessee against the reopening of the assessment were dismissed.