Case Reopening Merely Relying on Information Received from Insight Portal Held Invalid: ITAT

The ITAT Delhi has invalidated the reassessment proceedings initiated by the Income Tax Department in the case of Ayaan Buildcon Private Limited for Assessment Year 2013-14. In conclusion, the addition of Rs 2.90 crore made under Section 68 of the Income Tax Act on account of alleged accommodation entries was deleted.

During the hearing before the ITAT Delhi, the assessee, Ayaan Buildcon Private Limited, claimed that the tax authorities had reopened its case under 147/148 of the Income Tax Act without applying application of mind and merely relying on the information received through the CRUI Module and Insight Portal, which suggested that the assessee had received bogus accommodation entries from Pranam Foods Private Limited. Further flagged the facts that the Assessing Officer (AO) had initially accepted its return of income vide an assessment order dated November 26, 2019, passed under Section 153C of the Act, without verifying any further fact.

The reassessment was completed, making an addition amounting to Rs 2.90 crore on grounds of alleged accommodation entries received from Pranam Food Private Limited under Section 68 of the Act. The assessee stated that “further fact reopening has been done merely on the basis of assumption and presumption without any iota of information or evidence suggesting any escapement of income.”

On this statement of the assessee, the tax authorities claimed that there is no such law that exists which restricts reopening under Section 47/148 once the assessment is completed under Section 153C of the Act. In the proceedings, completed in 2019, the department itself had concluded that Ayaan Buildcon was merely a shell company allegedly controlled by Himanshu Verma and used for routing accommodation entries. Despite these findings, no addition had been made in the company’s hands, and its income was assessed at nil.

The aggrieved assessee approached the ITAT Delhi. When the case was thoroughly analysed by the tribunal, it was noted that the reassessment was based on the same set of facts and material that had already been considered during the earlier Section 153C proceedings. The Tribunal held that if a completed assessment is reopened, the assessing officer must rely on fresh material or new information. Merely reproducing information from the CRUI Module without independently examining the facts reflects non-application of mind.

Accordingly, the Tribunal held that the reopening was invalid and deleted the entire impugned addition of Rs. 2.90 crore.