ITAT Quashes Reopening Under Section 147: Mechanical Sanction Renders Reassessment Invalid

The assessee, a civil contractor, had undergone a full scrutiny assessment for AY 2012-13, during which the AO examined all transactions with M/s Mili Exim Pvt. Ltd., including a tripartite agreement with Reliance Infrastructure, bank statements and invoices, and accepted them. In 2019, relying solely on an Investigation Wing report labelling Mili Exim as a non-filer and alleged accommodation entry provider, the AO reopened the case after four years, without identifying any failure by the assessee to disclose material facts.

The PCIT granted approval with a bare “Yes, I am satisfied.” An addition of Rs. 46.32 crore followed in reassessment, but the  struck it down, holding the reopening invalid. The revenue thus appealed.

Central Issue: Whether a concluded scrutiny assessment can be reopened after four years based only on CIT(A) Investigation Wing inputs, when the same transactions were already examined in detail and there was no failure by the assessee to make a full and true disclosure.

Tribunal Held: The Tribunal upheld the CIT(A) and held the reopening invalid. It found that the AO had already examined and accepted the Mili Exim transactions in the original scrutiny, so reopening was nothing but a change of opinion. The recorded reasons copied the Investigation Wing report and showed no independent application of mind. Since the case was reopened after four years, the AO had to show a failure by the assessee to make a full and true disclosure, but no such lapse was identified. The sanction under Section 151 was also held mechanical, as the PCIT only wrote, “Yes, I am satisfied.”

Thus, both the Section 148 notice and the reassessment order were declared invalid and non-est, and the Revenue’s appeal failed.

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