The Delhi Bench of Income Tax Appellate Tribunal (ITAT) quashed the reassessment initiated under an invalid notice issued under Section 148 of the Income Tax Act, 1961 and deleted additions amounting to ₹9,75,301.
Sheel Trading Company, the appellant-assessee, was engaged in trading activities and had filed its return of income for Assessment Years (AY) 2013-14 and 2014-15. For AY 2013-14, the assessee’s case was re-opened under Section 148 of the Act, and the re-assessment proceedings resulted in an addition of Rs. 9,75,301.
A re-assessment was initiated under Section 148 of the Act, and certain additions of Rs. 9,75,301 were made to the income. Later, the First Appellate Authority confirmed the additions, but the assessee challenged the re-assessment proceedings.
A notice under Section 148 of the Act was issued on March 30, 2021, as the AO believed the assessee had made purchases from bogus entities. The AO made an addition of Rs. 9,75,301 to the assessee’s income, which was later confirmed.
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Dissatisfied with the AO’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) CIT(A), who dismissed the appeal on February 22, 2024. The assessee subsequently filed an appeal before the tribunal.
The Tribunal reviewed the case and noted that the AO initiated re-assessment proceedings under Section 148 of the Act, based on incriminating materials found during the search of Dhanuka Group, revealing the assessee’s purchases from bogus entities. The appellant argued that the re-assessment should have been initiated under Section 153C of the Act, rather than Section 148.
ITAT observed that the Assessing Officer incorrectly invoked Section 148 of the Act, instead of Section 153C, to initiate re-assessment proceedings based on incriminating materials found during the search of Dhanuka Group, leading to an unlawful reopening of the assessment.
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The single-member bench of Madhumita Roy (Judicial Member) allowed the appeal, concluding that the AO incorrectly initiated re-assessment proceedings under Section 148, instead of Section 153C, leading to the quashing of the re-assessment.
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