Inappropriate Initiation of a Tax Evasion Case Proceedings by Assessing Officer(AO) u/s 147

In this article, we’ll discuss the tax evasion petition and how the AO, without proper evidence and without being satisfied by the documents, decided to start tax evasion case proceedings u/s 147. To know about this matter, keep on reading the article.

Facts Regarding Inappropriate Initiation of a Tax Evasion Case

After receiving the formal tax evasion request, the reopen ITD (Income Tax Department) has issued a notice under section 148. According to the tax evasion petition, the assessee had advanced loans from two parties concerning which pending cases were there. The AO (Assessing Officer) made a judgment that the assessee did not explain the amount of 5,50,000 INR (provided as a loan) and, as a result, included it into his taxable income under section 68.

The assessee took this topic in front of Corporate Income Tax (A), who denied the request. Recently, the assessee reached an appeal in front of the Tribunal, which concerns the current law of the case.

The Income Tax Appellate Tribunal (ITAT) noticed that the Assessing Officer didn’t think logically. After being unsatisfied, which is needed u/s 147 of ITA, took the action of reopening the proceedings considered wrong in the law.

The Crucial Operative Extracts Came from the Judgment of ITAT

The ITAT has made a judgment about G & G Pharma Limited’s case.

In the current case, after setting off the four entries, the entries were declared to be received by the assessee on 10.02.03 from the four entries (termed as accommodation entries). On this issue, the Assessing Officer said that he had also analyzed several reports and materials from the Wing of Investigation. According to them, it was clearly seen that the company of assessee must introduce its own unaccounted funds in its own bank account through the mentioned entries.

The AO statement is not that useful to understand the exact matter as the AO had not talked about the materials and records he analyzed. Without knowing the proper facts regarding the materials, the Assessing Officer couldn’t state that the company of assessee must introduce its own unaccounted funds in its own bank account through the way of the mentioned entries. From the considered point of view of the Court, focusing light on the law described with enough precision by the Supreme Court on the conclusion argued in the preceding part of this discussion, the common requirement that the AO should have kept in his head was the reason to believe in his statement of material analysis. What happened here is he didn’t have ways to prove that the Assessee’s s income was escaped from assessment.

Reasons Why AO Hadn’t Properly Made the Decision of Initiating the Proceedings

1. The AO had only considered that Assessee had given a loan of 300000 INR and 2,50,000 INR to Mr. Dipak and Mr. Sanjay.
2. The AO must have not even thought that the loan transactions between the assessee and the two men weren’t corrupted.
3. The AO assuredly not noted that he had caused to prove that the assessee had escaped income of 5,50,000 INR from assessment, and thus he couldn’t satisfy himself before starting the proceedings.
4. Even after starting the proceedings under section 147 or 148, AO wasn’t able to prove that Sanjay received an advance of 2,50,000.
5. It is proven that neither AO applied his brains before reopening the case nor investigated properly during the proceedings.

To conclude, what we understood in this article is that the AO has not properly decided to initiate the proceedings of the tax evasion case. It didn’t have evidence and records to prove his action.