No Reopening for Fishing & Roving Enquiries: ITAT Invalidates Section 147 Proceedings

Ambica Timber Trade Pvt Ltd Vs ITO (ITAT Delhi)

The Delhi ITAT partly allowed the assessee’s appeal for AY 2012-13 by quashing reassessment proceedings initiated under Section 147 of the Income-tax Act, 1961. The assessee had challenged both the validity of the reassessment and the addition of Rs. 7,39,62,714 on merits. Since the issue of jurisdiction was fundamental, the Tribunal examined it first.

The reassessment was initiated based on information received from the Investigation Wing, Gurgaon, alleging that the assessee had received accommodation entries amounting to Rs. 7,39,62,714 from eight entities associated with the Spaze Group. The Assessing Officer recorded that these transactions had not been disclosed in the return for AY 2012-13 and reopened the assessment to verify their source.

The assessee contended that the amounts represented sale proceeds received against sales of goods made to those entities, aggregating Rs. 12,50,45,247. It relied upon its profit and loss account and sales records, which included transactions with the eight parties. The Tribunal found that the sales had been disclosed by the assessee, credited in the profit and loss account, offered to tax, and accepted by the Revenue. Consequently, it held that there was no income escaping assessment and, therefore, no valid basis for forming a belief under Section 147.