ITAT Delhi Quashes Reassessment Proceedings Based on Suspicion

The Income Tax Appellate Tribunal (ITAT) Delhi has ruled in favour of a petitioner who was wrongly suspected of being linked with an accused Chartered Accountant in money laundering Activities.

The matter started when the assessing officer (AO) had reopened the assessment under Section 148 of the Income Tax Act, based on the information received from the Investigation Wing about the money laundering activities carried out by a chartered accountant, Tarun Goyal. The assessing officer observed large-value transactions being carried out between sister concerns using various bank accounts. The AO presented details of some financial transactions involving Guru Kirpa Enterprises and Amandeep Singh in the reasons he gave for reopening the case.

When the petitioner initially filed an appeal before the CIT(A), the same was rejected. Therefore, the assessee filed an appeal with the ITAT Delhi. The assessee submitted that the notice under Section 148 was issued based on suspicion, without any proof of connection between the petitioner and any wrongdoing. The assessee claimed that there was no relationship shown between the petitioner and CA Tarun Goyal, who was alleged to be running shell companies. He claimed that the AO rejected this explanation without proper basis, relying only on doubts and assumptions.

The ITAT referred to the Delhi High Court’s decision in Saraswati Petrochem Pvt. Ltd., which ruled that reassessment based only on suspicion is invalid. The tribunal observed that the AO only relied on suspicions from the investigation wing. The reasons recorded by him did not show any direct link between Amandeep Singh and Tarun Goyal, and such proceedings are bad in law.

Therefore, ITAT held that not mentioning proper reasons for reassessment proceedings is bad in law therefore, it quashed the reassessment proceedings made by the AO.