Gopal Chand Mundhra and Sons Vs ITO (ITAT Delhi)
The ITAT Delhi, in the case of Gopal Chand Mundhra and Sons Vs ITO, quashed the reassessment proceedings against the assessee for Assessment Year (AY) 2011-12. This decision, which applied to a batch of appeals with similar facts, was based on the finding that the initiation of reassessment was invalid due to a mechanical approach by the Assessing Officer and the approving authorities.
The case originated from information received by the tax department’s Investigation Wing, which alleged that the assessee was a beneficiary of a tax evasion scheme involving bogus long-term capital gains (LTCG) on the shares of a company named “Splash Media.” The Assessing Officer (AO) then initiated reassessment proceedings under Section 147 of the Income-tax Act, based on a belief that income of over ₹20 lakh had escaped assessment.
The assessee challenged the validity of the reassessment on two main legal grounds. First, the assessee argued that the AO had acted on “borrowed satisfaction” from the Investigation Wing without any independent application of mind. The reasons recorded by the AO were a mere reproduction of the information received, lacking any tangible material or a crucial link to support a genuine belief that income had escaped assessment.
