Paras Polycab Pvt. Ltd. Vs ITO (ITAT Delhi)
Delhi ITAT Quashes Reassessment of ₹1.88 Crore Bogus Purchases: Reopening Beyond 4 Years Invalid When Purchases Were Fully Examined in Original Scrutiny
The Delhi ITAT quashed reassessment proceedings initiated under section 147, holding that where the assessee had fully disclosed the relevant purchase transactions and the AO had specifically examined them during the original scrutiny assessment, the same matter could not be reopened beyond four years without establishing failure by the assessee to disclose fully and truly all material facts.
The original assessment had been completed under section 143(3) after accepting the returned income. Subsequently, on information alleging that Surbhi Impex was providing accommodation entries/bogus purchase bills, the AO reopened the assessment and treated purchases of ₹1,88,48,833 as bogus, besides making a further addition of about ₹3.77 lakh towards alleged 2% commission for obtaining such accommodation entries.
However, the Tribunal found that during the original scrutiny the AO had specifically called for purchase details and the assessee had furnished complete purchase details relating to Surbhi Impex, confirmations, ledger accounts, bank statements, purchase invoices and other supporting material.
The ITAT observed that the original AO had examined the purchase details, stock registers, bank statements and balance confirmations and accepted the purchases as genuine. The subsequent reopening was based solely upon information received, without examining it in the context of material already available on record. Significantly, despite repeated requests, the recorded reasons for reopening were never supplied to the assessee.
Since reopening occurred after expiry of four years, the first proviso to the erstwhile section 147 required the AO to establish failure on the assessee’s part to disclose fully and truly all material facts. The Tribunal found precisely the opposite—the assessee had furnished “every possible detail” concerning the purchases from Surbhi Impex. Relying upon Kelvinator of India Ltd., it reiterated that a completed assessment cannot be reopened merely on a change of opinion.
Following the Supreme Court ruling in NDTV v. DCIT (424 ITR 607) and Kelvinator, the ITAT held that all material facts had already been disclosed, no new fact was brought on record, and the recorded reasons were never supplied to the assessee. Consequently, the reassessment proceedings and the resultant reassessment order were quashed in entirety. The remaining grounds became academic.
The Tribunal also separately condoned a substantial 515-day delay in filing the ITAT appeal, considering the serious illness of the company’s director and following the Supreme Court’s liberal approach in Collector, Land Acquisition v. Mst. Katiji.
