Reassessment based on third-party information and unexplained money addition failed when disclosure and limitation requirements were not met.
Reassessment based only on third-party information was held unsustainable where the notice under section 148 was issued beyond six years from the end of the assessment year and no independent material showed failure to disclose material facts. The accompanying addition for alleged accommodation entry also could not be sustained when the amount had already been disclosed in the return and reflected in the books, leaving no valid basis to treat it as unexplained money under section 69A or to apply section 115BBE. The reassessment and related addition were therefore set aside, granting relief to the assessee.
Issues: (i) whether reassessment initiated for the assessment year 2013-14 on the basis of third-party information was valid when the notice under section 148 of the Income-tax Act, 1961 was issued beyond six years from the end of the assessment year; (ii) whether the amount treated as accommodation entry could be added as unexplained money under section 69A of the Income-tax Act, 1961 and brought to tax under section 115BBE of the Income-tax Act, 1961 when it was already disclosed in the return and reflected in the books.
Issue (i): whether reassessment initiated for the assessment year 2013-14 on the basis of third-party information was valid when the notice under section 148 of the Income-tax Act, 1961 was issued beyond six years from the end of the assessment year
Analysis: The reopening rested solely on information received from a third party and there was no independent material showing failure by the assessee to disclose fully and truly all material facts necessary for assessment. The notice under section 148 was issued after the expiry of six years from the end of the relevant assessment year, and the jurisdictional requirement for reopening beyond that period was not satisfied.
Conclusion: The reassessment was invalid.
Issue (ii): whether the amount treated as accommodation entry could be added as unexplained money under section 69A of the Income-tax Act, 1961 and brought to tax under section 115BBE of the Income-tax Act, 1961 when it was already disclosed in the return and reflected in the books
Analysis: The amount in question had already been disclosed in the return of income, and the factual basis for treating it as unexplained money was not established. In the absence of sustainable reassessment and without a valid basis for characterising the amount as unexplained, the addition could not be upheld.
Conclusion: The addition under section 69A of the Income-tax Act, 1961 and the consequential application of section 115BBE of the Income-tax Act, 1961 were not sustained in favour of the Revenue.
Final Conclusion: The reassessment and the related addition were set aside, and the assessee obtained complete relief in the appeal.
Ratio Decidendi: Reassessment beyond the prescribed limitation period cannot be sustained on the basis of third-party information alone unless the statutory preconditions for reopening are independently met, and an amount already disclosed cannot be treated as unexplained without a legally sustainable basis.
TaxTMI 
AI Drafter ✕
TaxTMI 
