Reassessment – Sections 147 & 148 – A.Y. 2002- 03 – Information received from ED – AO set out information received from ED – He failed to examine if that information provided the vital link to form the ‘reason to believe’ that income of the assessee has escaped the assessment for the A.Y. in question – Reopening of the assessment is not valid

The assessment for the A. Y. 2002-03 was reopened on the basis of the information received from the enforcement directorate. The Tribunal held that the reopening is not valid.

On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:

“i) The Assessing Officer set out the information received from the Enforcement Directorate but he failed to examine if the information provided the vital link to form the ‘reason to believe’ that the of the income of the assessee had escaped assessment for the assessment year in question.

ii) While the Assessing Officer had referred to the fact that the Enforcement Directorate gave the information regarding cash deposits being found in the books of the assessee, the Assessing Officer did not state that he examined the returns filed by the assessee for the said assessment year and detected that the said cash deposits were not reflected in the returns.

iii) Further, information concerning payments made to third parties, which were unable to be verified by the Enforcement Directorate, also required to be assessed by the Assessing Officer by examining the returns filed to discern whether the said transaction was duly disclosed by the assessee.
iv) Consequently, no error was committed by the Tribunal in the impugned orders in coming to the conclusion that the reopening of the assessment was bad in law.”