Delhi HC Dismisses Reassessment Under Sections 147/148 for AO’s Non-Application of Mind

PCIT Vs SNG Developers Limited (Delhi High Court)

The Delhi High Court decided the Revenue’s appeal under Section 260A of the Income-tax Act, 1961 against the order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2003–04. The appeal challenged the ITAT’s affirmation of the Commissioner of Income Tax (Appeals) [CIT(A)] holding that the reassessment initiated under Sections 147 and 148 of the Act was invalid.

The assessee had filed its return of income on 25 November 2003 declaring an income of ₹76,340. On 31 March 2010, the Assessing Officer (AO) issued a notice under Section 148 stating that income of ₹95,65,510 had escaped assessment based on information received from the Directorate of Income Tax (Investigation). According to the recorded reasons, the Investigation Wing had identified persons engaged in providing accommodation entries and alleged that the assessee had received accommodation entries aggregating ₹95,65,510 during the relevant financial year. The AO recorded that these entries represented the assessee’s own unaccounted money and sought approval under Section 151(2) for issuance of notice under Section 148. Annexure B to the recorded reasons listed 19 accommodation entries totalling ₹95,65,510.

The assessee’s objections to the reopening were rejected by the AO on 24 September 2010. Thereafter, an assessment order under Section 144 read with Section 147 was passed on 16 December 2010 adding ₹95,65,510 to the assessee’s returned income.