The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) held that the reason for reopening under section 147 of the Income Tax Act, 1961, should be on definite and specific grounds. It shouldn’t be placed upon borrowed satisfaction.
Read More: May 2025 Income Tax Compliance Calendar: Key Dates and Deadlines
The assessee, Delightful Estate Developers LLP, filed its return for the Annual Year (AY) 2017-18, declaring nil income.
Later, in May 2018, tax authorities conducted a search on the Banka Group. During this search, they discovered that Mukesh Banka and his companies were involved in providing accommodation entries. The tax department alleged that the assessee had received ₹68 lakh in such bogus loans from five shell companies linked to the Banka Group.
Want a deeper insight into the Income Tax Bill, 2025? Click here
Based on the findings, the Assessing Officer (AO) reopened the case, claiming that the assessee received ₹68,00,224 as bogus loans from these entities.
Read More: Kerala High Court restores Doctrine of Mutuality
Aggrieved by the AO’s order, the assessee appealed to the Commissioner of Income Tax (Appeal) (CIT(A)), who deleted the additions. The revenue then appealed to the ITAT, while the assessee filed a cross-objection challenging the validity of the reassessment.
Sunil Surana, counsel for the assessee, argued that the reopening was invalid as the AO’s reasons lacked specifics like transaction dates or lender details. The counsel cited CIT vs. Insecticides (India) Ltd. (2013) to argue that vague reasons cannot justify reassessment.
Meanwhile, Rajat Datta, the counsel for the revenue, justified the additions made by the AO.
How to Audit Public Charitable Trusts under the Income Tax Act Click Here
The counsel contended that the search findings provided sufficient cause to believe income escaped assessment. The counsel asserted that the AO relied on Banka’s statements and bank records to prove the loans were bogus.
After hearing arguments from both sides, the bench, led by Rajesh Kumar (Accounting Member) and Sonjoy Sarma (Judicial Member), carefully examined the reasons recorded by the AO for reopening the assessment.
Read More: Finance Ministry notifies Import Duty Relief for Select Rice Imports from May 1, 2025
The tribunal found that the AO failed to provide specific details such as names of entities, dates of transactions, mode of receipt, or any direct link between the assessee and the alleged accommodation entries. Instead, the AO merely reproduced generic findings from the Banka Group search without presenting concrete evidence.
Know Practical Aspects of Tax Planning, Click Here
The bench held that reassessment must be based on definite and verifiable information, not broad inferences or generic allegations. The AO had not applied his mind independently and had relied on borrowed satisfaction, which could not justify reopening.
Finding the recorded reasons vague and lacking any nexus to the assessee, the tribunal held the reassessment to be invalid and upheld the decision made by the CIT(A).
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
