ITAT Quashes Re-Assessment based on Wrong Facts [Read Order]

Re-Assessment

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the re-assessment under section 147/ 148 of the Income Tax Act, 1961 cannot be held as valid as it was based on wrong facts.

The assessing officer, on the basis of the information received from ACIT, Central Circle-22, New Delhi re-opened the assessment. On investigation, he came to know that the assessee is one of the beneficiaries of accommodation entries provided by S. K. Gupta. On the strength of this information notice under section 148 was issued and served upon the assessee.

Before the Tribunal, the appellants contended that the reasons for reopening the assessment are on incorrect facts and therefore assessment should be quashed. In so far as disallowance of expenses are concerned the appellants stated that the Assessing Officer has given very general reasons and therefore ad-hoc disallowances should not have been made.

The Tribunal observed that there is no mention of any cheque number and amount shows are Rs.10 Lacs. As per bank statement which is at page 36 of the paper book on 09.09.2004 there is a cheque entry of Rs. 1 lacs cheque number is 00884535/-.

Allowing the appeal, the Tribunal held that “It can be seen that the Assessing Officer has proceeded on wrong assumption fact. The amount of Rs. 10 lacs is not supported by any cheque number whereas the allegation is that the assessee has received accommodation entry from Sh. Gupta through cheque. In my considered opinion the basis of reopening itself is based on wrong facts, therefore, the same cannot be upheld. I accordingly set aside the notice u/s 148 of the Act the reassessment based on such notice deserves to be quashed. Since the assessment itself has been quashed the other ad-hoc disallowance stand deleted.”

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