AO Fails To Demonstrate Live Link Between Tangible Material & Reason To Believe Escaped Income: Delhi ITAT Quashes Reopening

On finding that the requirement of application of mind is missing in the instant case, the Delhi ITAT held that the reassessment made in the section 143 read with section 147 of the Income Tax Act, 1961, is bad in law and hence, the re-assessment order is quashed. The ITAT pointed that there is no independent application of mind by the AO to tangible materials and reasons and the AO failed to demonstrate live link between tangible material and formation of reason to believe that income had escaped assessment. The only basis on which the reasons recorded by the AO was based on the DDIT report and the AO has not even given the details of report which is the basis for reopening of assessment to believe that there is escapement of income of more than 15 crores.” As per the brief facts of the case, the assessment was proposed to reopen on the ground that no return of income has been filed by the assessee for the year under consideration when in fact the assessee had filed return of income. The Bench reiterated while referring the decision of Gujarat High Court in the case of Vijay Harishchandra Patel vs. ITO 4 that, “In the reasons recorded, the Assessing Officer had based his belief on the fact that the assessee had not filed any return due to which there was an escapement of income on account of sale of an immovable property. Therefore, on finding that the AO has failed to demonstrate live link between tangible material and formation of reason to believe that income had escaped assessment, ITAT dismissed the revenue's appeal.