Singhal Fasteners Company Pvt. Ltd. Vs DCIT (ITAT Delhi)
Borrowed Satisfaction Invalid – ITAT Delhi Quashes Reassessments Based on Retracted Statement of Entry Operator
Shankar Radhey Finance & Investment Co. Pvt. Ltd. Vs ITO (ITA No.1067/Del/2019, AY 2009-10); Raghvender Shankar Finance & Investment Co. Pvt. Ltd. Vs ITO (ITA No.8572/Del/2019, AY 2006-07)
These three appeals were filed against reassessment orders framed u/s 147/148 based solely on statements of one Shri Aseem Kumar Gupta (alleged entry operator), who was said to have provided accommodation entries. The allegation was that these companies were beneficiaries of such entries, leading to additions u/s 68.
Assessees argued that the reopening itself was bad in law since the entire basis was the statement of Shri Aseem Kumar Gupta, which had been retracted much before issuance of reopening notices. The retraction was on record but never considered by AO while recording reasons. Hence, there was no “tangible material” to form belief of escapement of income.
Tribunal examined the reasons recorded for reopening & found them to be mere reproduction of Investigation Wing report, without any independent application of mind by AO. It held that when a retracted statement is the sole basis, AO must specifically refer to the retraction & demonstrate corroborative evidence to justify reopening. In absence of such, the reasons become invalid. Reliance was placed on earlier ITAT rulings (Raghvi Finance & Investment Pvt. Ltd., Sungrow Impex Pvt. Ltd., RNAM Finlease Pvt. Ltd.) which had quashed similar reassessments based on Aseem Gupta’s retracted statement. Accordingly, Tribunal quashed the reassessments in all three cases, allowing appeals of the Assessees.
