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2018 (8) TMI 205 - HC - Income Tax


Issues:
Challenges to reassessment notices for A.Y. 2008-09 and 2009-10 based on undisclosed income from accommodation entries provided by entry operators.

Analysis:
The reassessment notices were issued based on information received from the Director of Income Tax regarding accommodation entries provided to the assessee by certain entry operators. The investigation revealed a modus operandi where unaccounted cash was routed through bogus companies to the assessee, disguising it as share application money, share capital, or loans. The assessee argued that all relevant details regarding share application moneys were disclosed during the original assessment under Section 143(3) of the Income Tax Act, including responses to detailed questionnaires about the genuineness of share applicants. The petitioner contended that the AO did not provide reasons for accepting the materials furnished during the original assessment, justifying the reassessment. Citing precedent, the petitioner argued that where assessment orders lack reasoning, reassessment is justified. However, the court found that the reassessment notice was vague and lacked specific details about the identities and amounts related to the alleged accommodation entries, rendering it unsustainable in law.

The court emphasized that even though the AO's orders lacked reasoning, the Full Bench ruling upheld by the Supreme Court stated that inadequate reasons cannot justify reassessment if material was already provided by the assessee. In this case, the reassessment notice failed to disclose crucial details such as the identities of bogus creditors or entry operators and the exact amounts involved, rendering it overbroad and unsustainable. Consequently, the court quashed the reassessment notices and all further consequential proceedings, allowing the writ petitions in favor of the assessee.

 

 

 

 

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