Reassessment based on Incorrect Presumptions Invalid: ITAT Quashes Reassessment Order [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT) quashed a reassessment order under Section 147 of the Income Tax Act,1961, finding it based on incorrect presumptions and lacking supporting evidence.

Komal Ketan Shah,appellant-assessee,made an unaccounted cash payment of Rs. 99,85,000 during the assessment year. Following a search under Section 132 of the Act on Rajyash/Samarth Group, Ahmedabad, the Assessing Officer (AO) found evidence of this payment as on-money. Since the assessee failed to explain the source of funds, the AO treated the amount as unexplained income under Section 69 of the Act.

Aggrieved by the decision the assessee appealed before the Commissioner of Income Tax(Appeals)[CIT(A)] who dismissed the appeal. The assessee then appealed before the tribunal.

The assessee's counsel argued that the reassessment was based on incorrect facts. The AO claimed that the assessee had invested Rs. 99,85,000 in the "Reevera" scheme and earned profits of Rs. 31,12,075, but the counsel clarified that no such booking or profits were made. The AO also mentioned an investment by Jigar Shah in the "Rise" scheme, but the assessee had no connection with him, making the reassessment flawed.

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The counsel added that the assessee was denied the opportunity for cross-examination and was not provided with the documents relied upon by the AO. It was also pointed out that similar reassessment proceedings were initiated for the following year, showing a lack of clarity about the alleged investment year.

Read More: Assessment Order by AO without Proper Examination of Documents is Invalid: ITAT Quashes Order

The Departmental Representative (DR) supported the AO and CIT(A)'s findings, arguing that the appellant's low income return failed to justify the creditworthiness for the alleged investment.

The two member bench comprising Dr.BRR Kumar(Vice President) and Siddhartha Nautiyal(Judicial Member) found that the reassessment was based on incorrect facts. It noted that the appellant had denied making any investment in the "Reevera" project, and the Assessing Officer (AO) failed to provide details of any sale deed or property involved. The reassessment order under Section 147 also lacked information on the seller, property, or how the alleged profit of Rs. 31,12,075 was made.

Since the reassessment was based on incorrect assumptions, the appellate tribunal set aside the order.

To Read the full text of the Order CLICK HERE

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