Reassessment Invalid Due to Lack of New Tangible Material and Credible Information: ITAT Quashes ₹33.81 Lakh Addition [Read Order]

The Surat Bench of the Income Tax Appellate Tribunal (ITAT) ruled that the reassessment under Section 147 of the Income TaxAct, 1961, was invalid due to the lack of new tangible material and credible information and quashed the Rs. 33.81 lakh addition as commission income.

Nazar Impex Private Limited (assessee) filed return of income for Assessment Year (AY) 2012-13, declaring a total income of Rs. 4,69,120. Following a search under Section 132 on the Rajendra Jain group, the assessee was covered under Section 133A, revealing involvement in bogus bills as accommodation entries.

A notice under Section 153C was issued, and the assessment was completed under Section 144 read with Section 153C, determining commission income at Rs. 33,81,582 and assessing total income at Rs. 25,36,186 after allowing 25% expenses.

Subsequently, the case was reopened under Section 148 based on information from DDIT(Inv.), alleging transactions of Rs. 5,44,66,359 with M/s Rose Impex, controlled by the Bhanwarlal Jain group, for bogus loans and purchases. The Assessing Officer (AO) rejected the books under Section 145(3), estimated commission income at Rs. 33,81,582, and added it to the income.

Aggrieved by the AO’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) upheld the validity of the reopening, confirming it was based on information indicating escaped income, and dismissed the appeal.

Aggrieved by the CIT(A)’s order, the assessee appealed to the ITAT. The assessee’s counsel argued that the reopening was invalid as no new tangible material existed. The counsel submitted that the information was already available during the original assessment.

The two-member bench comprising Suchitra R. Kamble (Judicial Member) and Bijayananda Pruseth (Accountant Member), observed that the information from DDIT(Inv.) was available before the Section 153C notice and was considered in the original assessment.

The bench held that reopening without new tangible material violated established principles, as reaffirmed by jurisdictional High Court rulings. It concluded that the notice under Section 148 was invalid and quashed the reassessment order under Section 144 read with Section 147 of the Income Tax Act.

The addition of Rs. 33,81,582 was set aside on jurisdictional grounds. The appeal of the assessee was allowed.

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