The Tribunal held that mechanical reopening does not meet the requirement of "reason to believe" as per section 147 of the Income Tax Act.
Nidhi | Apr 13, 2026 |
Reopening Income Tax case without Independent Verification by AO is Bad in Law: ITAT
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, quashed a reassessment order holding that it was initiated without proper application of mind.
The case of the assessee, Himanshu Daksheshkumar Katwala, was reopened under section 147 of the Income Tax Act, based on the information received from the Investigation Wing. This information alleged that the assessee was involved in accommodation entries of Rs 29,81,262 through third-party entities managed by Shri Jignesh Shah and Shri Sanjay Shah. These were found to be engaged in offering fake entries. The Assessing Officer treated this amount as unexplained income under Section 69A and added it to the assessee’s total income.
The assessee challenged the reassessment order before the CIT(A), but the appeal was dismissed due to delay and also because the appeal was against a rectification order, and the CIT(A) held that the issues relate to the original assessment order and cannot be adjudicated in such a case. Therefore, the assessee approached the ITAT.
The taxpayer argued that the reopening was invalid, as it was based on general third-party information. He denied having any direct link to the said third parties. He also argued that no proper evidence was shown to prove that the assessee had taken accommodation entry.
The Tribunal observed that the reassessment lacks “fundamental legal infirmity”. It was observed that the case was reopened based on the investigation report of third parties, and the AO did not mention the exact nature of the alleged income escaping assessment. Additionally, the AO did not even provide details like parties involved, transaction dates, its mode, etc.
It was concluded that the order was passed without any independent verification or inquiry conducted by the Assessing Officer. The Tribunal held that such mechanical reopening does not meet the requirement of “reason to believe” as per section 147 of the Income Tax Act.
As a result, the tribunal quashed the additions and the assessment order.
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