Reopening of Assessment permissible in case of Accommodation Entries without physical transportation of goods

In Geetaben Dineshchandra Gupta v. Income Tax Officer Circle 3(3)(2) [R/Special Civil Application No. 18325 of 2019 dated August 23, 2021], Geetaben Dinesh chandra Gupta (“the Petitioner”) has filed the current petition challenging the notice dated March 23, 2019 which proposed the reopening of assessment of the Petitioner under Section 148 of the Income Tax Act, 1961 (“the IT Act”).

The Petitioner contended that even after the petitioner disclosed all material and relevant facts for the assessment, he received the notice without any reason cited by of the Income Tax Office (“the Respondent”), because of which the notice issued requires to be quashed.

The Respondent whereas contended that the Petitioner through his proprietorship firm, carried out huge transactions of purchases and sales for which mere accommodation entries were provided without there being any physical transportation of goods. The inquiry conducted showed that the petitioner earned commission on the said accommodation entries which were not revealed in the return. Due to the same, assessment was thereby reopened.

The Hon’ble Gujarat High Court observed that the Petitioner had indeed escaped assessment on the commission earned by the accommodation entries which were not revealed while disclosing income.

Further noted, that the investigation carried out by the investigation wing clearly substantiated the case of the Respondent. Therefore, the belief of the Assessing Officer about the income of the Petitioner being escaped from assessment is justified.

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