AO Must Dispose Reopening Objections Before Reassessment: ITAT Mumbai

Libra Natural Resources Private Limited Vs ITO (ITAT Mumbai)

Objections Cannot Be Buried in the Final Order – Reassessment Quashed for Skipping the GKN Mandate

Background

The assessee-company was engaged in importing electronic goods such as batteries and torches and selling them in the wholesale market. For Assessment Year 2015-16, it filed its original return declaring a total income of ₹29,29,433.

A search was conducted by the Investigation Wing in the case of Shri Renukamata Multi State Co-operative Urban Credit Society Ltd. The Department allegedly found that several accounts maintained with the society belonged to persons of limited financial means, although substantial cash deposits and high-value transactions had been routed through those accounts.

Based on the information received from the Investigation Wing, the Assessing Officer formed a belief that the assessee had undertaken unexplained transactions of ₹3,20,97,440 with Ashish Panchal, proprietor of Nine Impex, and ₹8,33,00,000 with Zara Trading Private Limited through the said credit society. The total alleged unexplained transactions amounted to ₹11,53,97,440.

Since these transactions were allegedly not reflected in the return of income, the assessment was reopened under section 147 by issuing notice under section 148.

Assessee Denies Transactions and Files Objections

In response to the notice under section 148, the assessee filed its return on 28 July 2021. The recorded reasons were also supplied to it.