Sumit Chhabra Vs Assessment Unit (ITAT Delhi)
Borrowed Satisfaction Vitiates Reassessment – ITAT Quashes Reopening in Case of Alleged Bogus Purchases
In cross appeals by Assessee & Revenue, Delhi ITAT dealt with reassessment initiated on the allegation that Assessee had taken accommodation entries of bogus purchases from M/s KB Enterprises amounting to ₹2.37 crore during FY 2017-18. The original return was filed declaring ₹18.15 lakh, which was already scrutinized & accepted u/s 143(3) by NFAC in April 2021. However, based on information from Investigation Wing regarding accommodation entries routed by one Aditya Jain through dummy concerns including M/s KB Enterprises, notice u/s 148A(b) was issued in March 2022, culminating in reassessment with addition u/s 69C.
CIT(A) restricted addition to 6% of alleged bogus purchases, prompting Revenue to appeal for full addition & Assessee to challenge validity of reopening.
Tribunal noted that AO had not conducted any independent inquiry & merely reproduced Investigation Wing report regarding search in case of M/s KK Spun India Ltd., where Aditya Jain had admitted to providing accommodation entries. Crucially, the AO ignored that Assessee’s case was already assessed u/s 143(3), where the same purchases were accepted. The reasons recorded reflected confusion between bogus sales & bogus purchases, showing non-application of mind. Relying on jurisdictional Delhi High Court ruling in Sanjay Kaul Vs. ITO (W.P.(C) 11198/2019, 30.05.2025), which held that “reason to believe” cannot be equated with “reason to suspect” & reopening cannot be based solely on general Investigation Wing reports, ITAT held that the reassessment was founded on borrowed satisfaction. Absence of tangible material, non-furnishing of Investigation Wing report to Assessee & failure to conduct inquiry rendered the reopening invalid. Accordingly, ITAT quashed reassessment proceedings, allowed Assessee’s appeal, & dismissed Revenue’s appeal as infructuous.
