ITAT Pune Quashes Reassessment Based on Wrong Facts and Borrowed Satisfaction

Lombard Realty Pvt Ltd Vs DCIT (ITAT Pune)

The Pune Bench of the Income Tax Appellate Tribunal disposed of two appeals of the assessee for Assessment Years 2011-12 and 2013-14 through a common order.

For AY 2011-12, the assessee challenged the reassessment proceedings on the ground that the Assessing Officer (AO) recorded incorrect facts while reopening the assessment. Although the original assessment had been completed under Section 143(3), the recorded reasons incorrectly stated that no scrutiny assessment had been made and that the return had only been processed under Section 143(1). The AO subsequently completed reassessment under Sections 143(3) read with 147 and made an addition of Rs.48,27,72,000 under Section 68 in respect of share capital received from 22 companies. The Tribunal held that the reassessment was founded on factually incorrect reasons and that such incorrect facts could not be treated as a mere clerical error curable under Sections 292B or 292BB. It also observed that the original assessment had examined the relevant issues and that the AO had reopened the assessment merely on the Investigation Wing’s report without independent application of mind. Accordingly, the reassessment proceedings were quashed, and the addition on merits was not examined.

For AY 2013-14, the assessment had originally been processed under Section 143(1). The AO reopened the assessment on the basis of information from the Investigation Wing and made an addition under Section 68 treating amounts received as accommodation entries. The Tribunal noted that the Commissioner (Appeals) had already found that the assessee had not received certain amounts from two of the parties named in the recorded reasons, and the Revenue had not challenged those findings. The Tribunal held that this demonstrated reopening on incorrect facts and absence of independent application of mind. It further held that the reassessment was based solely on the Investigation Wing’s report and was therefore not sustainable. On merits, the Tribunal found that the impugned receipts represented sale proceeds of investments acquired in earlier years, disclosed in the balance sheet and accepted by the Revenue. Consequently, such sale proceeds could not be treated as unexplained cash credits under Section 68. The Tribunal quashed the reassessment proceedings, set aside the order of the Commissioner (Appeals), deleted the additions under Section 68, and allowed both appeals.