The Kolkata Bench of Income Tax Appellate Tribunal(ITAT) quashed the reassessment of the assessee for Assessment Year 2010-11, citing vague reasons and lack of jurisdiction for new additions.
Neena Commercial Pvt . Ltd.,appellant-assessee, filed its return of income on September 29, 2010. The Assessing Officer(AO) later received information about large cash deposits in ICICI Bank branches in Kolkata, which were transferred to the assessee’s accounts. It was alleged that the assessee received an accommodation entry of ₹15 lakh.
Based on this, the case was reopened under Section 147, and a notice was issued under Section 148. The assessee responded, stating that the original return should be treated as filed in compliance with the notice. During the assessment, all required details were submitted, and no addition was made for the ₹15 lakh entry. However, the AO added ₹6,38,81,102/- as unexplained cash credit from the sale of shares of paper companies.
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The assessee’s counsel argued that the case was reopened under Section 147 based on a notice issued under Section 148, with approval from the competent authority. The recorded reasons mentioned an accommodation entry of ₹15 lakh but did not specify the source. The counsel pointed out that in the final assessment order dated December 30, 2017, no addition was made for this amount, which was the reason for reopening.
It was contended that once the AO accepted the assessee’s position on the stated issue, any further addition was beyond jurisdiction under Explanation 3 to Section 147. The counsel relied on rulings in CIT vs. Infinity Infotech Parks Ltd. and Ganesh Steel & Alloys, along with other relevant judgments.
The counsel also argued that the reasons for reopening were vague, lacking details about the alleged bogus entries and involved parties. Since the information used to reopen the case was insufficient, the reopening was invalid. Citing CIT vs. Insecticides (India) Ltd., the counsel urged that the assessment be quashed.
In response, the revenue counsel argued that the issue was raised for the first time and should be sent back to the AO or CIT(A) for reconsideration.
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Read More:ITAT quashes Reassessment Order based on invalid Re-Assessment Notice issued without Jurisdiction
The two member bench comprising Pradip Kumar Choubey(Judicial Member) and Rajesh Kumar(Accountant Member) reviewed the case and found that the AO reopened the assessment under Section 147 after recording reasons that income had escaped assessment.
However, after examining the evidence, no addition was made for the ₹15 lakh from Violent Tradelink Pvt. Ltd., which was the reason for reopening. Instead, the AO added ₹6,38,81,102/- for the sale of shares in paper companies, which was not mentioned in the recorded reasons.
The appellate tribunal pointed out that since no addition was made for the stated escaped income, the AO had no authority to assess other income discovered later. This was supported by decisions from the Calcutta, Bombay, and Delhi High Courts.
Additionally, the ITAT noted that the recorded reasons were vague and lacked sufficient details. Because of this, the reopening was deemed invalid. The bench cited CIT vs. Insecticides (India) Ltd. to support its conclusion that the reassessment was based on insufficient information.
As a result, the tribunal quashed the reopening of the assessment.
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