2026 (2) TMI 355 - AT - Income Tax

Alleged accommodation entries in reassessment; AO examined evidence so revision was disallowed and assessment upheld.

Reassessment was reopened specifically for alleged accommodation entries; the AO issued notices, examined explanations and documentary evidence, and ... Revision u/s 263 - As per CIT AO failed to make additions or verify alleged accommodation entries - Lack of detailed discussion - HELD THAT:- Reassessment was reopened specifically on the issue of alleged accommodation entries. During reassessment proceedings, the AO issued notices, called for explanations, and examined the evidences furnished by the assessee. The assessee placed on record affidavits and disclosures wherein Shri Sanjay Shah owned up the transactions, and the same were part of the assessment records. Merely because the Assessing Officer did not make an addition or did not discuss the issue elaborately in the assessment order, it cannot be presumed that there was no enquiry. Lack of detailed discussion does not render the assessment order erroneous, when the records demonstrate that the Assessing Officer applied his mind and took a conscious decision. It is a fact on record that the name of the assessee is reflected in Annexure seized and the amounts were offered before the Settlement Commission. Hence, we hold that the order of the AO cannot be treated as erroneous or prejudicial to the interest of the Revenue. Assessee appeal allowed. Issues: Whether the Principal Commissioner of Income-tax was justified in invoking revisionary jurisdiction under section 263 of the Income-tax Act, 1961 to set aside the reassessment order passed under section 147/148 r.w.s.144 r.w.s.144B for AY 2015-16 on the ground that the Assessing Officer failed to make additions or verify alleged accommodation entries of Rs.95,09,351/-.Analysis: The reopening under section 147 was premised on information from a search indicating alleged accommodation entries. Reassessment proceedings record issuance of notices, consideration of explanations, and evidences including affidavits and disclosures where the entry operator admitted transactions and the assessee's name appeared in seized annexures. The Assessing Officer accepted the returned income after examining the material on record. Lack of elaborate discussion in the assessment order does not, by itself, demonstrate absence of enquiry where the records show that enquiries were made and a conscious decision was taken. Invocation of section 263 requires the reassessment order to be shown to be erroneous and prejudicial to the interests of revenue on the basis of lack of enquiry or incorrect application of mind; where the material indicates verification and acceptance of returned income, setting aside the order under section 263 is not justified.Conclusion: The revision under section 263 was not justified; the reassessment order is not erroneous or prejudicial to the interests of the Revenue and the appeal is allowed in favour of the assessee.