Kuljeet Singh Vs ITO (ITAT Delhi)
Delhi ITAT Quashes Reassessment for ‘Non-Application of Mind’ – AO Incorrectly Claimed Original Return Was Never Scrutinized
Delhi ITAT quashed the entire reassessment proceedings against the assessee after finding glaring non-application of mind in the very reasons recorded for reopening under section 147. The Tribunal noted that while recording reasons, the AO wrongly stated that the assessee’s return was only processed u/s 143(1) and had never been scrutinized, whereas in reality a regular assessment u/s 143(3) had already been completed on 11.02.2015.
The reassessment was triggered on the basis of Investigation Wing information alleging suspicious transactions with M/s Goodwill Enterprises and M/s Shree Shyam Overseas, entities which had allegedly not filed returns and had huge cash deposits in their bank accounts. Based on such information, the AO reopened the case alleging escapement of income of ₹59.80 lakh.
However, the Tribunal observed that while recording reasons, the AO invoked Explanation 2(b) to section 147, which applies only where a return has been filed but no assessment has been made. Since a scrutiny assessment u/s 143(3) had admittedly already been completed in the assessee’s case, invocation of Explanation 2(b) itself demonstrated complete lack of application of mind by the AO.
The assessee had also argued on merits that the impugned amounts represented genuine sales transactions of tyres and tubes to the concerned parties, supported by VAT registrations, Form-C declarations, invoices, ledger accounts and banking transactions. The assessee contended that the Revenue had accepted the sales turnover in books and without rejecting books of account, the same sales proceeds could not again be taxed u/s 68 as unexplained credits.
The ITAT noted that the AO’s entire addition was based merely on inability of the assessee to produce some old purchase bills relating to FY 2011-12. The Tribunal observed that despite extensive documentary evidence regarding sales, no independent enquiry was conducted by the department to establish that the transactions were bogus or accommodation entries.
Ultimately, the Tribunal held that the incorrect invocation of Explanation 2(b) while recording reasons clearly vitiated the jurisdiction assumed under section 147. Accordingly, the reassessment proceedings were declared “void ab initio, bad in law and erroneous” and quashed in entirety.
FULL TEXT OF THE ORDER OF ITAT DELHI
