The Income Tax Appellate Tribunal (ITAT), Delhi Bench quashed the reopening assessment in respect of accommodation entry without providing proper approval under Section 151 of Income Tax Act, 1961.
The assessee Agroha Fincap Ltd, challenged the reopening of assessment in respect of accommodation entry without providing proper approval under Section 151 of Income Tax Act, 1961.
The reason for issuing notice by Assessing Officer (AO) under Section 147 of the Income Tax Act was that Assesee had obtained the accommodation entry of Rs.20 lacs and has failed to discharge the onus cast on it by proving the identity and capacity of the loan creditor and the genuineness of the loan transaction.
Kumar Gupta, Assessee’s counsel contended that reassessment proceedings were not initiated in a mechanical manner or on borrowed satisfaction and without application of mind since the perusal of the reasons recorded clearly show that there is a thorough application of mind by the Assessing Officer and the approving authorities have also given valid reasons for reopening of the case.
Om Parkash, departmental representative argued that the assessee failed to discharge the onus cast on it by proving the identity and capacity of the loan creditor and the genuineness of the loan transaction and obtained accommodation entry from S.K. Jain group. Hence, with the proper approval from the Pr. CIT, the AO initiated the reassessment proceedings.
During the appeal proceedings, the tribunal observed that superior authorities have merely given their approval in a mechanical manner without independent application of mind.
Thus merely giving approval by mentioning “Yes, I am convinced it is fit case for reopening of assessment under Section 147 Income Tax Act by issuing notice under Section 148 Income Tax Act.” Does not comply with the mandatory requirement of granting approval under Section 151 of the Income Tax Act.
It can be concluded that the assessing officer has not followed the mandatory provisions of Sec. 144C of the Income Tax Act while issuing draft assessment order along with demand notice and computation sheet in the case of the assessee.
The tribunal after reviewing the facts and submissions of the both parties, the single member bench of C.M. Garg, (Judicial Member) quashed the reassessment proceedings and allowed the appeal filed by the assessee
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