JHM Developers Pvt Ltd Vs ITO (ITAT Delhi)
In the case of JHM Developers Pvt Ltd Vs ITO (ITAT Delhi), the assessee challenged the validity of the reopening of assessment for the assessment year 2011-12 under section 148 of the Income-tax Act, 1961. The reopening was initiated by the Assessing Officer (AO) solely for verifying transactions related to the sale of shares amounting to Rs. 26.95 lakh and a commission addition of Rs. 26,950. The AO’s action was based on the need to verify a total of Rs. 57.70 lakh worth of transactions. However, this purpose of reopening was contested by the assessee, and the validity of such action became the focal point of the appeal.
The Income Tax Appellate Tribunal (ITAT) observed that the reopening of the assessment under section 148/147 was initiated purely for the purpose of verification of these transactions, without any tangible evidence or material suggesting income had escaped assessment. Relying on previous judgments in PCIT v. Manzil Dinesh Kumar Shah (2018) and PCIT v. Maheshwari Devi (2023), the ITAT concluded that reopening proceedings for the sole purpose of verification, without a substantive reason to believe that income had been under-assessed, is not legally valid. Consequently, the ITAT quashed the reopening of the assessment, rendering all related proceedings and additions, including the ones concerning the sale of shares and commission, as legally invalid.
