Earth Star Cranes Vs ITO (ITAT Pune)
Wrong Sanctioning Authority Invalidates Reassessment; Pune ITAT Quashes AY 2017-18 Proceedings
In Earth Star Cranes v. ITO, the Pune ITAT decided the assessee’s appeals for AYs 2017-18 and 2019-20 arising from additions under section 68 concerning alleged accommodation-entry loans from Aneri Fincap Ltd.
For AY 2017-18, notice under section 148 was issued on 26 July 2022, i.e., more than three years after the end of the relevant assessment year. However, approval was obtained from the Principal CIT-1, Thane.
The Tribunal held that under section 151(ii), where more than three years have elapsed, approval must be obtained from the Principal Chief Commissioner, Principal Director General, Chief Commissioner or Director General. Since approval was granted by the Principal CIT, who was not the prescribed authority, the sanction was invalid.
Following the Bombay High Court rulings and its earlier decision in Hareshkumar Dungarmal Jain, the Tribunal quashed the entire reassessment for AY 2017-18. Consequently, additions of ₹75 lakh relating to the alleged bogus loan and ₹3.92 crore representing partners’ capital contributions were not examined on merits.
For AY 2019-20, the assessee restricted its arguments to the ₹3 lakh loan addition. Since the assessee had produced the lender’s confirmation and relevant bank statements, the Tribunal restored the matter to the Assessing Officer for fresh verification, after providing a reasonable opportunity of hearing.
