Sonansh Creations Pvt Ltd Vs ACIT And Anr. (Delhi High Court)
Delhi High Court held that initiation of reassessment under section 148 of the Income Tax Act unsustainable as based on information which is contested as palpably incorrect without examining the material giving rise to the said information.
Facts- The petitioner has filed the present petition impugning a notice dated 01.06.2022 issued under Section 148A(b) of the Income Tax Act, 1961; an order dated 30.07.2022 passed under Section 148A(d) of the Act; and a notice dated 30.07.2022 issued under Section 148 of the Act seeking to reopen the petitioner’s assessment for the assessment year (AY) 2017-18.
Conclusion- Clearly, absent any material to establish that the petitioner had received amounts in its bank accounts – the fundamental premise on which the allegation that it had received accommodation entries is founded – the petitioner’s assessment could not be reopened. We are unable to accept that the reassessment can be initiated on the basis of information which is contested as palpably incorrect without examining the material giving rise to the said information.
Held that the AO is required to ascertain whether the basic facts on which an assessment is sought to be reopened, are sustainable. An allegation that income has escaped assessment on account of accommodation entries availed by an assessee would be insufficient to reopen a closed assessment if the AO does not have material to establish that in fact there were entries in the bank accounts that could possibly support the said allegations. The AO is not required to conclusively decide whether the entries are accommodation entries. But the AO has to be reasonably certain that the alleged entries exist that could be possibly be accommodation entries. Thus, the petition is allowed and the impugned notices under Sections 148 and 148A(b) of the Act and the impugned order under Section 148A(d) of the Act are set aside.
