The reasons recorded for reopening the assessment under Section 147 must be based on tangible material and must be self-evident.

S. Muralidhar, J.

1.This appeal by the Revenue under Section 260A of the Income Tax Act, 1961 (‘Act’) is directed against the order dated 29th July, 2016 passed by the Income Tax Appellate Tribunal (‘ITAT’) in ITA No. 735/Del./2012 for the Assessment Year (‘AY’) 2003-04.

2. While admitting the appeal on 15th February, 2017, the following question of law was framed by the Court for consideration:

Did the ITAT and the CIT(A) fall into error in holding that the reassessment was not justified in law in the circumstances of the case?

3. The Assessee filed its return of income on 25th November, 2003 for AY 2003-04 declaring an income of Rs. 76,340.

4. On 31st March, 2010, the Assessing Officer (‘AO’) served a notice on the Assessee under Section 148 of the Act stating that he has reasons to believe that income of Rs. 95,65,510 had escaped assessment which was based on a report of the Directorate of Income-Tax (Investigation). The ‘reasons to believe’ as noted by the AO and as supplied to the Assessee read as under:

“Return of income in this case was filed on 25/11/2003 declaring total income of Rs.76,340 which was processed vide order u/s 143(1) dated 16/02/2004.

The directorate of Income Tax (Inv.), New Delhi has carried out a detailed enquiry about the persons /companies engaged in the business of providing accommodation entries to various companies. Information has been received along with the statements of persons who had admitted that they were in the business of providing accommodation entries and they were not doing any business but were engaged in the activity of providing accommodation entries to other concerns. These persons used to issue cheques in lieu of cash received after deducting their commission and these cheques were generally issued as share application money/ unsecured loans.

As per the information received, the above named assessee M/s. SNG Developer Ltd. (earlier known as S N JEE Developers (P) Ltd.) has also received the accommodation entries during the F.Y. 2002-03 as per annexure -B attached.

These accommodation entries involving total amount of Rs. 95,65,510 represent the assessee's own unaccounted money.

In view of above, I have reason to believe that an income of Rs. 95,65,510 has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961.

Since, as per the available records the assessment was not made in this case u/s 143(3) or 147 of the Act and period of 4 years has elapsed, proposal is hereby submitted along with the relevant assessment records to the Addl. Commissioner of Income Tax, Range-9, New Delhi for consideration and necessary approval in accordance with the provisions of section 15l (2) of the IT Act, 1961 for issuance of notice u/s 148 of the 1.T. Act.

5. Annexure B to the reasons set out the details of the entries which were 19 in number totalling Rs. 95,65,510/-.

6. The objections raised by the Assessee were rejected by the AO by an order dated 24th September, 2010. The AO proceeded to pass an assessment order under Section 144 read with Section 147 of the Act on 16th December, 2010 making an addition of Rs.95,65,510 to the declared income of the Assessee.

7. The Assessee then went in appeal before the CIT (A), who by order dated 19th August, 2011 allowed the appeal filed by the Assessee. The CIT (A) held that the re-opening of the assessment was “without any satisfaction, without verifying the information received from Directorate of Investigation” and that the “AO has not applied his mind. There is no satisfaction on the part of the AO regarding escapement of any income.”

8. The Revenue then went in appeal before the ITAT which was dismissed by the impugned order. The ITAT concurred with the CIT (A) that the jurisdictional requirement for re-opening of the assessment under Section 147 read with Section 148 of the Act had not been satisfied. In particular, the ITAT observed that the AO “has not given details what was stated by the so-called entry operators in respect of the