Jitendrakumar Dahyalal Parmar Vs ITO (ITAT Ahmedabad)
Reopening Based on Identical “Bogus Sub-Contractor” Reasons Quashed; 44AD Income Cannot Be Re-Disallowed: ITAT Ahmedabad
Summary:
The Ahmedabad Bench (SMC) of the Income Tax Appellate Tribunal (ITAT) allowed the assessee’s appeal for AY 2011-12 and quashed the reassessment proceedings under section 147, holding that the reasons recorded for reopening were mechanical, identical, and without independent application of mind.
The reassessment was initiated based on a search in the DRA Group, alleging that payments made to the assessee as a sub-contractor were bogus. The Assessing Officer added ₹25.71 lakh as bogus expenditure, despite the assessee having declared income under the presumptive scheme of section 44AD and not claiming any expenditure at all.
The Tribunal noted that:
- The reasons recorded for reopening were verbatim identical to those recorded in the cases of other alleged sub-contractors/sister concerns, with only the names and figures changed.
- Such borrowed satisfaction does not meet the statutory requirement of “reason to believe”.
- Once income is offered under section 44AD, no separate disallowance of expenses is permissible, and the addition resulted in double taxation.
- The assessee was not supplied with seized material or statements relied upon, violating principles of natural justice.
Relying on its earlier decisions, including Alpeshsinh K. Jadeja v. ITO and the Tribunal’s findings in the DRA Group search cases, the ITAT held that the foundation of the reassessment itself was invalid.
