Shah Mahendrakumar Mafatlal HUF Vs ITO (ITAT Ahmedabad)
Reopening Based on Incorrect “Accommodation Entry” Information Quashed: ITAT Ahmedabad
The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) allowed the assessee’s appeals for AYs 2014-15 and 2015-16, holding that the reassessment proceedings under section 147 were invalid as they were initiated on the basis of factually incorrect and unsubstantiated information regarding alleged accommodation entries.
The assessments were reopened on the premise that the assessee (HUF) had allegedly taken fictitious loans from Shri Jignesh Shah, a purported entry operator, amounting to ₹47.41 lakh (AY 2014-15) and ₹55.18 lakh (AY 2015-16), based on information reflected on the Insight Portal. During reassessment proceedings, the assessee categorically denied having taken any such loans and furnished bank statements, books of account, and details of unsecured loans, none of which showed any transaction with Shri Jignesh Shah or related entities.
Despite repeated requests, the Assessing Officer failed to provide any corroborative material, statements, or documentary evidence linking the assessee to the alleged fictitious loans. The Tribunal found that the entire reopening was founded on incorrect assumptions and unverified information, and that the AO made additions without controverting the evidence placed on record by the assessee.
The ITAT held that when the very basis of “reason to believe” is factually incorrect, the reopening is bad in law and void ab initio. Consequently, not only were the reassessment notices under section 148 quashed, but the entire assessments and additions made pursuant thereto were also set aside.
