Rakesh Arora Vs ITO (ITAT Delhi)
When the Reason Falls, the Case Falls: Rs. 3.14 Cr Trigger Proves False — ITAT Delhi Quashes Whole 147
The reassessment for AY 2012–13 was triggered solely on the allegation that the assessee had received accommodation entries of ₹3,14,16,000 from M/s Shreyas International. However, at the time of completing reassessment, the AO enhanced the figure and made an addition of ₹3,84,04,298 under Section 69A, along with other loan-related additions.
On appeal, the CIT(A) categorically held that the impugned amount was not unexplained money, but merely the return of loan earlier advanced by the assessee to Shreyas International in FY 2010–11. The CIT(A) also noted that the balance ₹3,64,82,259 returned in the subsequent year (AY 2013–14) was fully accepted by the Department, further proving the genuineness of the loan cycle. Accordingly, the entire ₹3.84 crore addition was deleted.
Applying the binding Third-Member decision in Mahesh Kumar v. ITO, which follows Jet Airways (331 ITR 236) and Ranbaxy Laboratories (336 ITR 136), the ITAT held that once the very addition for which the case was reopened is deleted, the Assessing Officer cannot sustain any other additions under Section 147. Explanation 3 does not empower the AO to proceed when “such income” (i.e., the income forming the reason to believe) does not survive.
Since the foundational addition of ₹3.84 crore (linked to the recorded reason of ₹3.14 crore) stood deleted, the ITAT held the entire reopening invalid and quashed the reassessment order dated 31.12.2019.
Result: Reassessment quashed in full; assessee’s appeal allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
