R. A Shah And Co. Vs DCIT (ITAT Mumbai)
Section 143(2) Notice Before Return Makes Reassessment Void; ₹2 Crore Section 68 Loan Addition Based on Investigation Report Deleted; No Fresh Section 143(2) Notice After Return; Reassessment Quashed; Documented and Repaid Loans Cannot Be Branded Accommodation Entries
Summary:The Mumbai ITAT allowed the assessee’s appeal for Assessment Year 2010-11 on two independent grounds. First, it held that the reassessment was void ab initio because no notice under section 143(2) was issued after the assessee filed its return in response to the notice under section 148. Secondly, even on merits, the Tribunal deleted the addition of Rs.2,00,00,000/- made under section 68 in respect of unsecured loans received from Daksh Diamonds and Rahul Export.
The assessee had originally filed its return of income on 08.09.2010 declaring total income of Rs.91,99,430/-. Reopening proceedings were initiated by notice under section 148 dated 13.02.2015 on the basis of information arising from search and survey action conducted by the DGIT (Investigation), Mumbai in the case of Shri Bhavarlal Jain Group on 03.10.2013. The Assessing Officer recorded that the assessee was allegedly a beneficiary of accommodation entries of Rs.1,00,00,000/- each from Daksh Diamonds and Rahul Export. During reassessment, the assessee furnished loan confirmations, bank statements, copies of the lenders’ returns of income and evidence that the transactions were through account payee cheques. The Assessing Officer nevertheless treated the loans as unexplained cash credits. Although the reassessment initially added only Rs.20,00,000/- because the amount of each loan was inadvertently taken as Rs.10,00,000/-, an order under section 154 dated 22.03.2016 corrected the addition to Rs.2,00,00,000/-.
