Saluja Steel and Power Pvt. Ltd Vs ACIT (ITAT Ranchi)
The ITAT Ranchi quashed the reassessment for AY 2013–14, holding that the reasons recorded for reopening were fundamentally flawed and factually incorrect. The assessee’s original assessment had been completed under section 143(3) after detailed scrutiny of share application money and share premium, including issuance of notices under section 142(1) and summons under section 131 to share applicants, whose directors had appeared and furnished details.
Post-search, the AO issued notice under section 148 based on an investigation report alleging bogus share capital. However, the Tribunal found that the reasons mixed up distinct entities, examined wrong addresses, and named companies that had not invested at all. A partnership firm that was an existing shareholder was wrongly treated as a bogus entity, and the quantum of alleged escapement did not match the assessee’s actual receipts. These were not minor discrepancies but basic factual inconsistencies, showing no independent application of mind and absence of a live link between material and belief of escapement.
Crucially, the issues cited for reopening had already been examined during the original scrutiny, and even a cursory verification of the assessment record would have revealed the errors. The Tribunal held that when the foundation (reasons) is erroneous, the entire reopening fails. Consequently, the reasons, the section 148 notice, and the reassessment order were all quashed, and the assessee’s appeal was allowed, without needing to adjudicate alternative legal arguments
