Chandrakant Kantilal Patel (HUF) Vs ITO (ITAT Ahmedabad)
Reassessment Quashed for Ignoring Reply Filed Under Section 148A(b): ITAT Slams ‘Borrowed Satisfaction’
The Ahmedabad ITAT quashed reassessment proceedings initiated against an HUF after finding that the Assessing Officer ignored the assessee’s detailed reply and documentary evidences filed in response to notice under Section 148A(b), and mechanically proceeded on borrowed information from the Insight Portal without independent application of mind.
The assessee had originally filed return declaring income of about ₹10.92 lakh, which was accepted in scrutiny assessment under Section 143(3). Subsequently, reassessment proceedings were initiated alleging that the assessee had advanced loan of ₹92 lakh to M/s Avadh Buildcon, allegedly disproportionate to returned income. Notices under Section 148A(b) were issued granting extremely short time for compliance, including one notice effectively giving less than one day to respond. Despite this, the assessee filed detailed reply along with bank statements, ITRs, computations and confirmations explaining the source of funds.
However, while passing order under Section 148A(d), the AO incorrectly recorded that no reply was filed and no adjournment was sought. The Tribunal held that this was factually incorrect and demonstrated complete non-application of mind as well as gross violation of principles of natural justice. The ITAT further observed that reopening was based merely on Insight Portal information without any independent enquiry or verification by the AO, amounting to impermissible “borrowed satisfaction.”
Even on merits, the Tribunal found the ₹92 lakh addition under Section 69 unsustainable. The assessee had established identity, creditworthiness and genuineness of transactions through income-tax returns, financial statements, bank records and confirmations of family members. The Tribunal also noted that the alleged borrower company, though claimed by Revenue to be a strike-off entity, had substantial taxable income and tax payments in multiple years. Further, the loan had subsequently been repaid along with interest, which was duly offered to tax.
Criticising the approach of the tax authorities, the ITAT observed that officers should be sensitized not to ignore facts already available on record while disposing of reassessment matters. Accordingly, the entire reassessment proceedings as well as the addition were quashed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
