2025 (3) TMI 299 - AT - Income Tax

Assessment reopening under section 147 invalid due to vague reasons and borrowed satisfaction without independent verification

ACIT, CC 3 (2), Kolkata Versus M/s Delightful Estate Developers LLP And (Vice-Versa)

The ITAT Kolkata held that the assessment reopening under section 147 was invalid as the AO failed to provide complete transaction details and acted on ... Reopening of assessment u/s 147 - reasons to believe - addition u/s 68 - HELD THAT:- On perusal of the above reasons, we observe that the ld. AO has not completely mentioned the details of transactions which the assessee has entered into during the impugned year as accommodation entries such as the particulars as to person from whom/ entity from whom the money was received and when it was received etc. AO merely reproduced the information available with the department and recorded his so-called satisfaction in one line that on the basis of information available, the assessee has taken accommodation entry which in our opinion is wrong and against the provisions of the Act. The reasons are sanctity, unambiguous and vague and the ld. AO acted merely on the basis of borrowed satisfaction without any independent application of mind. Therefore, we are of the view that the case of the assessee was invalidly reopened u/s 148 of the Act. Addition u/s 68 - Even on merit, we note that the loans raised by the assessee were fully repaid and assessee has filed all the information/ evidences before the ld. AO but the ld. AO has not done any independent verification and so much so that that the notice u/s 133(6) of the Act were not issued and he merely relied on the statement recorded during the course of search u/s 132(4) of the Act that Mr Banks and his associate concerns were engaged in providing accommodation entries. Even the cross examination requested by the assessee was not granted and the ld. CIT (A) after taking int account all the facts allowed the appeal of the assessee by directing the ld. AO to delete the addition. Decided in favour of assessee. The issues presented and considered in the judgment are as follows:1. Whether the proceedings initiated under section 147 of the Income Tax Act based on vague reasons are maintainable.2. Whether the addition of 72,89,457/- made by the Assessing Officer should be deleted.3. Whether the loans received by the assessee from shell companies should be treated as unexplained cash credit and added to the income of the assessee.Issue-wise detailed analysis:1. The legal issue raised in ground no.3 of the cross objection of the assessee pertains to the validity of the reopening of assessment under section 147 of the Act. The Tribunal found that the reasons for reopening the assessment were vague and did not contain sufficient details of the transactions entered into by the assessee. The Tribunal held that the reasons were ambiguous and lacked clarity, violating the provisions of the Act. Citing the decision of the Hon'ble Delhi High Court in CIT vs. Insecticides (India) Ltd., the Tribunal quashed the reopening of assessment and the consequent order passed by the Assessing Officer.2. The second issue involved the deletion of addition of 72,89,457/- made by the Assessing Officer. The Tribunal noted that the loans raised by the assessee were fully repaid, and the assessee had provided all relevant information and evidence to the Assessing Officer. However, the Assessing Officer did not conduct independent verification and relied solely on statements recorded during the search operation. The Tribunal found that the ld. CIT (A) had considered all facts and directed the Assessing Officer to delete the addition. The Tribunal upheld the decision of the ld. CIT (A) on the merits of the appeal.Significant holdings:- The Tribunal held that the reopening of assessment based on vague and scanty reasons is not maintainable under the law.- The Tribunal quashed the reopening of assessment and allowed the cross objection filed by the assessee on legal grounds.- The Tribunal upheld the decision of the ld. CIT (A) to delete the addition of 72,89,457/- based on the merits of the appeal.- The appeal of the Revenue was dismissed as infructuous.In conclusion, the Tribunal ruled in favor of the assessee, holding that the reopening of assessment was invalid due to vague reasons and that the addition made by the Assessing Officer should be deleted. The Tribunal emphasized the importance of clear and unambiguous reasons for reopening assessments and highlighted the need for independent verification of facts by the Assessing Officer.