AO’s Action Based on ADIT Report Equals ‘Borrowed Satisfaction’: ITAT Quashes Reassessment Proceedings [Read Order]
ITAT held that the reassessment proceedings were bad in law as no independent enquiry was conducted by the AO.
![AO’s Action Based on ADIT Report Equals ‘Borrowed Satisfaction’: ITAT Quashes Reassessment Proceedings [Read Order]](https://images.taxscan.in/h-upload/2025/06/04/2041273-reassessment-proceedings-itat-delhi-taxscan.webp "AO’s Action Based on ADIT Report Equals ‘Borrowed Satisfaction’: ITAT Quashes Reassessment Proceedings [Read Order]")
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) quashed reassessment proceedings initiated against the assessee by noting that the Assessing Officer (AO) had acted solely on a report from the Assistant Director of Income Tax (Investigation) without conducting an independent inquiry. The assessee had appealed against the order passed by the Commissioner of Income...
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) quashed reassessment proceedings initiated against the assessee by noting that the Assessing Officer (AO) had acted solely on a report from the Assistant Director of Income Tax (Investigation) without conducting an independent inquiry.
The assessee had appealed against the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] for the Assessment Year (AY) 2012-13, for sustaining the additions made by the AO under Section 68 of the Income Tax Act, 1961. In this case, the AO had reopened the assessment under Section 148 of the Income Tax Act, 1961, by noting unexplained credit entries totaling Rs. 25 lakhs in the assessee's bank account.
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Coming to the facts of the case, the AO relied on an investigation report alleging that the assessee had failed to explain the source of these credits. The report claimed that the assessee did not appear for personal deposition despite a summons, while another individual, Shri Manpreet Singh Chadha, had complied.
The AO concluded that the credits were unjustified, especially since the assessee's return for AY 2012-13 showed income from other sources at only Rs. 6,10,072. However, the ITAT noted that the AO overlooked the assessee's exempt income of Rs. 15,26,571, which was duly declared in the same return.
Read More: Also Read:ITAT Strikes Down Reassessment based on Borrowed Satisfaction [Read Order]
The assessee's counsel submitted that the assessment in this case was reopened based on the report of the Investigation Wing, and the Assessing Officer made no independent enquiry
to come to the belief that there is an escape of income in the case of the assessee. The counsel thus argued that the AO’s reliance on the ADIT report amounted to "borrowed satisfaction
The assessee also provided evidence to explain the credits. A sum of Rs. 10 lakhs was received from Krishan Bans Bahadur, a friend, through banking channels. Though Bahadur had passed away, the assessee submitted his bank statements to corroborate the transaction. Another Rs. 15 lakhs came from PAN India Motor (P) Ltd., an associate company, supported by confirmations, PAN details, and bank statements.
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The ITAT found these explanations satisfactory, noting that all transactions were routed through banking channels and repaid similarly.
The ITAT, comprising Challa Nagendra Prasad (Judicial Member), held that the reassessment proceedings were bad in law as no independent enquiry was conducted by the AO.
The assessee’s appeal was allowed, and the reassessment proceedings were quashed.
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