Accommodation Entry Transactions: ITAT quashes Revision Order upholding Plausible View by AO [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has quashed a revision order passed under Section 263 of the Income Tax Act, 1961, in a case involving alleged accommodation entry transactions. The matter arose when the Principal Commissioner of Income Tax (PCIT), Ahmedabad-1, invoked revisionary powers to set aside an assessment order passed in the case of Synwave Industries for the Assessment Year 2013-14.

The intervention was prompted by information indicating that the assessee had entered into transactions totaling Rs. 17,94,345 with entities believed to be providing accommodation entries, based on statements recorded from third parties. However, the Assessing Officer (AO) had completed the reassessment without making any addition on this ground after verifying the details during assessment proceedings.

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The appeal was heard by Ms.Suchitra Kamble (Judicial Member) and Shri Makarand V. Mahadeokar (Accountant Member). The assessee was represented by Shri Y.K. Batra, Authorized Representative (A.R.), while the Revenue was represented by Shri V. Nandakumar, CIT-D.R. The assessee’s counsel contended that the PCIT wrongly assumed jurisdiction under Section 263, as the AO had already examined the relevant transactions in detail and taken a plausible view based on the evidence provided, including bank statements, journals, ledgers, and audited accounts.

It was emphasized that all queries raised by the AO, including those pertaining to the alleged accommodation entries, were adequately addressed during the proceedings, and that no link was established between the assessee and the entities flagged in the reopening.

The Tribunal observed that the AO, during the reassessment, had specifically sought details of all transactions with the flagged entities and had verified the responses and supporting documents submitted by the assessee. The bench noted that a difference of opinion after the conclusion of assessment could not be the sole basis for invoking Section 263, and that the PCIT’s reliance on a note allegedly recorded by the AO post-assessment could not override the findings in the original assessment order. Importantly, the Tribunal pointed out that the AO’s approach reflected a plausible view after proper application of mind, and any subsequent opinion by the AO in the context of Section 263 proceedings would amount to a mere “second opinion.”

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In conclusion, the ITAT found that the original assessment order was neither erroneous nor prejudicial to the interest of the Revenue, as required for action under Section 263. Accordingly, the Tribunal set aside the PCIT’s revision order and restored the assessment order as passed by the AO.

The appeal of the assessee was allowed, providing relief in the face of what the bench termed an unjustified invocation of revisionary jurisdiction.