Aroma Chemicals Vs ACIT (ITAT Delhi)
The appeal before the Income Tax Appellate Tribunal (ITAT), Delhi concerned the validity of reassessment proceedings initiated against the assessee for Assessment Year (AY) 2015–16. The reassessment arose from an order passed by the National Faceless Assessment Centre under sections 147, 144, and 144B of the Income-tax Act, 1961, which was upheld by the National Faceless Appeal Centre (CIT(A)).
The reassessment was initiated through a notice issued under section 148 dated 30 March 2021. The basis for reopening was information received through the Insight Portal indicating that the assessee had earned profits of ₹1,31,95,650 during FY 2014–15 from “reversal entries” in stock option trades. According to the information flagged by the Directorate of Income Tax (I&CI), Lucknow, such trades were allegedly non-genuine and carried out to generate accommodation entries of profits and losses. The Assessing Officer (AO) concluded that these profits were bogus and represented undisclosed income.
During reassessment proceedings, several notices were issued to the assessee, which were recorded as not being complied with. The AO completed the assessment under section 144, making an addition of ₹1,31,95,650 under section 68. The assessee responded to a show cause notice, stating that the disputed amount was already included in the returned income of ₹2,01,12,181 and supported this claim with contract notes and summaries. The AO rejected this explanation, holding that the trades were artificial, non-genuine, and intended to mask unexplained income.
