2023 (10) TMI 139 - HC - Income Tax

Reopening of assessment - allegations levelled against the petitioners/assessees are that they are beneficiaries of accommodation entry provided by one Mr Ankit Jain, proprietor of Rishabh Trading Company - what's the relevant material available with AO which persuaded him to trigger the reassessment proceedings against the petitioners/assessees? HELD THAT - As referring to answer furnished by Mr Ankit Jain this was the only part of the statement that Respondent could rely upon in support of his stance that there was material available to establish under-invoicing being carried on. At the highest, what can be stated in favour of the respondents/revenue is that Mr Ankit Jain has accepted the fact that cash transactions were made outside the books of account. Significantly, there is, however, no reference to the petitioners/assessees. Revenue has not been able draw our attention to any part of the statement which refers to the petitioners/assessees - respondent in our view, cannot but accept that the documents evidencing approval, if any, granted for commencement of reassessment proceedings against the petitioners/assessees ought to have been furnished to the petitioners/assessees. Thus we are of the view that best option available to the AO would be to go back to the drawing board and if deemed necessary, reinitiate the proceedings against the petitioners/assessees, albeit, as per law. Accordingly, the impugned notices and order are set aside with liberty to the AO to recommence the proceedings, having regard to what is stated hereinabove

Summary

Issues involved: Assessment proceedings for AY 2019-20 based on allegations of accommodation entry, validity of reassessment proceedings, approval for reassessment, discrepancies in cash transactions, and material evidence against the petitioners/assessees.

Validity of Reassessment Proceedings:
The petitioners/assessees were alleged to be beneficiaries of accommodation entry by Mr. Ankit Jain. Despite asserting the genuineness of transactions, the AO proceeded with reassessment, escalating the alleged amount. The counsel argued lack of material to trigger reassessment and absence of approval for commencing proceedings, highlighting discrepancies in the AO's order and Mr. Jain's statement. The court found the AO's actions flawed and set aside the impugned notices and order, directing a lawful recommencement of proceedings.

Material Evidence and Discrepancies:
The AO relied on Mr. Jain's statement regarding under-invoicing in cash transactions, but there was no mention of the petitioners/assessees in the statement. The translated statement revealed cash transactions outside the books of account, but the lack of reference to the petitioners/assessees weakened the case. The court noted the absence of evidence linking the petitioners/assessees to the alleged discrepancies, emphasizing the need for substantial material to support reassessment proceedings.

Approval for Reassessment and Legal Compliance:
The counsel contended that the approval for reassessment proceedings was not disclosed to the petitioners/assessees, questioning the validity of the entire process. The court agreed that the documents evidencing approval should have been provided, underscoring the importance of legal compliance and transparency in such proceedings. Consequently, the court directed the AO to restart the proceedings lawfully, ensuring adherence to due process and statutory requirements.

Conclusion:
In light of the above considerations, the court set aside the impugned notices and order, granting liberty to the AO to recommence the proceedings in accordance with the law. The writ petition was disposed of accordingly, and parties were instructed to act based on the digitally signed copy of the order, bringing closure to the pending interlocutory application.