Re-Assessment based on Information from Investigation Wing of Income Tax Department is Valid: ITAT [Read Order]

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) observed that re-assessment based on information from Investigation Wing of Income Tax Department is valid.

The assessee in the present appeal is SHM Products Pvt.Ltd. (formerly known as Mercantile & Marine Services India Pvt. Ltd.)

The Counsel for the assessee pointed out that the addition made by the AO is only to the tune of Rs. 15 lakhs which has been deleted by the CIT(A). According to the Counsel, the tax effect in this case was only Rs. 4 lakhs which is less than the prescribed monetary limit given by the CBDT. Therefore, the assessee objected against the admission of the Revenue appeal.

According to the Departmental Representative, in the present case, the information on which the addition/disallowance has been made was based on the adverse report from the sales Tax Authorities therefore, the same falls under the exception and therefore appeal is maintainable.

The word ‘External Sources’ is used by CBDT to be an information received from sources which are external to Income-Tax Department and various departments/wings which works under its aegis. Directorate of Income-tax (Investigation) is ‘law enforcement agency’ under the Ministry of Finance and controlling authority is Investigation division of CBDT.

In the case of DGIT v. M/s Pabal Housing Pvt Ltd, the Tribunal observed that the information received from Directorate of Income tax (investigation) cannot be considered to be an information received from an external source.

The Tribunal of Aby T Varkey, Judicial Member observed that “I hold that the appeal of the Revenue is not maintainable because the source of information on which AO re-opened the assessment was emanating from the investigation wing of the Income Tax Department and not from the external law enforcement agencies to fall in the exception to agitate before this Tribunal despite hit by low tax effect.”

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