Regalia Jewels Pvt. Ltd Vs DCIT/ACIT (ITAT Delhi)
ITAT Delhi rules tax reassessment invalid under Section 147 as AO’s ‘reason to believe’ was based on an incorrect assumption of facts about purchases; ITAT Quashes Tax Reassessment Based on Flawed Factual Premise; Dehradun Bench Rules Incorrect Assumption Invalidates Reopening Jurisdiction
Dehradun: The Income Tax Appellate Tribunal (ITAT), Delhi Bench (Dehradun), has set aside a reassessment order passed under Section 147 of the Income Tax Act, 1961, ruling that the Assessing Officer (AO) had invalidly assumed jurisdiction because the “reason to believe” that income had escaped assessment was founded on an incorrect assumption of facts. The Tribunal held that a fundamental factual error at the stage of forming the belief necessary for reopening is fatal to the entire reassessment process.
The case involved Regalia Jewels Pvt. Ltd. and pertained to the assessment year 2015-16. The company had filed its original income tax return for this year, which was routinely processed by the Income Tax Department. No detailed scrutiny assessment was initially carried out for this period.
The events leading to the reassessment began later, following a search and seizure operation conducted by the department on November 6, 2019, in the case of an individual named Shri Deepak Jain. According to the department’s findings from this search, Shri Deepak Jain was identified as a person providing accommodation entries, essentially facilitating transactions that create a false appearance of genuineness. Information unearthed during the search suggested that Shri Deepak Jain, through five different entities controlled by him, had allegedly provided accommodation entries to Regalia Jewels Pvt. Ltd. This information indicated that the company was a beneficiary of these entries, seemingly obtaining bogus purchase bills from these entities.
